Sources of Comparative Advantage in Data-Related Services
Abstract : Does digital infrastructure increase trade benefits in services, and how large are these trade benefits? This paper uses the prevalence of countries’ data centres and secure internet servers to investigate the impact of data-related infrastructures on services trade. Data centres and internet servers facilitate the production and tradability of many services sectors reliant on software technologies. Therefore, data infrastructures are complementary sources of comparative advantage in the more data-reliant sectors. Using as instruments a country’s exposure to natural hazards since 1900, such as earthquakes, floods and droughts, instrumental variable regressions underscore this trade impact. Overall, data infrastructures are an important and exogenous determinants of specialization patterns in services more dependent on software.