Mobile and internet usage, institutions and the trade balance: Evidence from African countries

Abstract

This study examines the influences of institutions, the Internet and mobile usage on the trade balance of African countries between 2003 and 2017. Our empirical results have been estimated with a panel‐corrected standard error method (PSCE) and they have been confirmed by several alternative techniques. First, the increase of internet usage and mobile usage has a significant negative effect on total and inter‐continental trade balances while these factors improve the intra‐African trade balances. Second, better institutions appear to have a negative impact on the total‐, inter‐, and intra‐African trade balances – in other words, better institutions appear to stimulate imports rather than exports. This observation explains the decreasing trends in the current account balances of African countries. Third, the combined effect of the three factors (institutions, internet, and mobile use together) has a significant positive impact on all trade balances: total‐, inter‐, and intra‐continental. Our study shows that an improvement in institutional quality acts as a mitigating factor for any negative impact internet\mobile development might cause on the trade balances of African countries. Further, our analysis examines the influence of institutions, internet usage, and mobile usage on the two parts of the trade: exports and imports. We observe that internet and mobile can influence negatively and differently impact the two wings of the balance trade. However, all improvements in institutions and their associations with internet usage and mobile usage have a significant positive impact on the trade balance especially on exporting activities of African countries.

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