ICT, trade, economic growth, and unemployment nexus: panel evidence from the Indian Ocean Rim Association

This study investigates the impact of Information and Communication Technology (ICT) adoption on international trade flows within the Indian Ocean Rim Association (IORA) countries by employing an augmented gravity model framework. The study explores two primary hypotheses: first, that ICT adoption positively influences international trade, economic growth, and unemployment reduction; and second, that the interplay between ICT adoption and geographic distance significantly affects trade flows. The study is based on a balanced panel dataset covering the period 2000–2020 using the Feasible Generalized Least Squares (FGLS) estimation. The findings reveal that GDP levels in both exporting and importing countries exhibit a positive and significant relationship with bilateral trade flows, in accordance with gravity model predictions. Distance negatively impacts trade flows, confirming the traditional frictional effect of geographic distance on trade. Among ICT variables, mobile cellular subscriptions demonstrate a robust positive influence on trade flows, underscoring the pivotal role of mobile connectivity in facilitating international trade. Conversely, broadband penetration, fixed telephone lines, and internet usage display mixed or negative associations, suggesting that digital connectivity may substitute physical trade through the proliferation of digital goods and services. The interaction effects of ICT and distance further indicate that while mobile technology enhances trade irrespective of distance, reliance on obsolete communication infrastructure, such as fixed telephone lines, detrimentally affects trade performance. These results contribute to the growing body of literature on ICT-trade linkages by explaining the differentiated roles of various ICT components in shaping trade patterns across developing economies. The study offers policy implications for fostering mobile technology diffusion and digital infrastructure development to enhance export competitiveness and participation in global value chains.