How does Digitalization Affect Trade in Goods and Services? Evidence from G20 Countries

This study analyzes the impact of digitalization on the trade of goods and services in a gravity model. By using panel data of the Group of Twenty (G20) countries for 2005-2019, we find that (1) digitalization has a more positive effect on trade in services than on trade in goods; (2) digitalization is more likely to have a positive impact on exports, especially service exports rather than imports; (3) digitalization in high-income countries tends to have a positive effect on trade in services rather than trade in goods, whereas the use of mobile phones in middle-income countries has a promotion effect on the export of services. To promote trade volumes, G20 countries should increase investment in the development of digital technologies and reduce barriers to digital trade.