Recent Development in Infrastruture and Its Impact on Agrigultural and Non-agricultural Trade

The recent development of the telecommunication industries that form the " info structure " environment has enhanced economic activity through improved information technology (IT). IT could enlarge the volume of information flow, which accelerates productivity, but its impact on international trade has not been tested. The main objective of this thesis is to estimate the relationship between telecommunication and the volume of trade. More specifically, we estimate the effect of improved telecommunication on bilateral trade of agricultural and non-agricultural goods among the Organization for Economic Cooperation and Development (OECD) countries in each year from 1997 to 2001. This study revises the traditional gravity model by including variables representing the telecommunication infrastructure in exporting and importing countries to evaluate the effect of recent development in the telecommunication infrastructure on bilateral trade of agricultural and non-agricultural goods among the OECD countries. The results indicate that per capita GDPs, geographical sizes, and telecommunication investments in both exporting and importing countries are significant and positively related to the value of bilateral trade between them. In agricultural trade, the importing countries' investment in telecommunication is more important than that of exporting countries. In addition, the distance between trading countries is significant and negatively related to the bilateral trade value. The other dummy variables, representing the EU, NAFTA, common language, and common border, are also significant and positively related to bilateral trade values. iv ACKNOWLEDGMENTS