The effect of broadband on European Union trade: A regional spatial approach

The positive effect of information and communication technologies (ICT) on trade between countries has been widely studied in the literature, but how ICT impacts regional trade is limited due to the lack of regional trade data. In this paper, we test whether broadband, as a proxy for ICT, increases bilateral trade at the regional level in Europe. We use a novel regional trade database of European Union regions and estimate an origin-destination flow gravity model for 2007 and 2010, accounting for spatial dependence among trade flows. Our results indicate that broadband is positive and significant in explaining trade patterns between European regions during both time periods.