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World Economy Brief

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Title International Comparison and Trade Effects of Digital Innovation
Author Nakgyoon Choi, Kyu Yub Lee and Hyuk-Hwang Kim
Date 2019-01-18
File WEB 19-01.pdf 

Digital innovation will bring about revolutionary changes in all activities in the social and political sphere, not to mention the areas of technology, industry, trade, and other economic transactions. In this study, we analyzed the level of digital innovation and digital utilization by country and industry. According to the results of our analysis, significant improvement was made in the world's digital innovation (number of patents), led by the U.S. and Japan, showing a stair-step increase in the years of 1998 and 2010. This study also examines the impact of digital innovation on international trade. Counterfactual analysis based on a variant of the Ricardian model shows that digital innovation is beneficial to international trade. In other words, if digital innovation boosts fundamental productivity, it triggers growth in international trade at both sector-level and country-level.