Plenary Session Va: Inclusive Trade Through Online Presence

1. North-West University, South Africa
Inclusive Trade Through Online Presence
Dr. Emmanuel Orkoh
Prof. Robert Teh

2. #2023 AGRODEP CONFERENCE
Introduction
Extensive literature on how adances in ICT have spurred firms’ innovation, reduced
trade cost, improved custom procedures, efficiency in logistics, and improved export
and performance.
10 percentage increase in the growth of web host in a country leads to about 0.2
percentage point increase in export growth (Freund & Weinhold, 2004).
Doublking internet usage in a country contributes to about 2-4% increase in services
trade (Choi, 2010).
Firms in developing countries who have access to the internet incrrease share of their
export by 32-36% (Timmis, 2013).
Firms using high-speed internet connections/website are 6-10% more likely to
participate in global value chains (Goplan et al., 2022).

3. #2023 AGRODEP CONFERENCE
Introduction
We examine the extent to which online presence could propel inclusion by helping
firms that traditionally struggle to export.
Such firms include firms:
Owned or managed by women
Majority of the workers are females
SMEs
Located in low-income countries and developing regions of the world
Services sector firms.
We use firm-level data and firms to self-select into exporting as well as for possible
endogeneirty of the explanatory variables.

4. #2023 AGRODEP CONFERENCE
Data and variables
World Bank Enterprise Survey (WBES), covers 180,000 enterprises from 154 countries
2006-2021.
Information captured include:
Enterprises’ characteristics, perfomance, and busines environment topics (regulations,
infrastructure, finace and degree of competetion).
Information on firms sales:
Share of sales in national market
Share of sales in international market (direct & indirect export).
Direct export–immediate receipient is outside the country
Indirect export–goods and/or services sold to a trader/third party who export the
product without modification.

5. #2023 AGRODEP CONFERENCE
Data and variables
We focus on direct export
Our outcome/dependent variable:
Share of sales directly exported (constant dollar level of export calculated by
multiplying sale in local currency with the share of direct export and converting it USD
using U.S. GDP delfator in 2015 constant dollars).
Independent variables
Online presence– If a firm uses either website/email/internet/broadband.
Website
Email
Internet
Broadband

6. #2023 AGRODEP CONFERENCE
Methodology
We employ selection with an endogenous explanatory variable in both the selection
and outcome equations
• 𝑦𝑖𝑗𝑡
∗𝑘
= 𝛼0 + 𝛼1𝑂𝑖𝑗𝑡
𝑘
+ 𝛼2𝑋𝑖𝑗𝑡
𝑘
+ 𝜐𝑘
+ 𝜃𝑗 + 𝜌𝑡 + 𝜖𝑖𝑗𝑡
𝑘
(1)
• 𝑠𝑖𝑗𝑡
∗𝑘
= 𝛽0 + 𝛽1𝑂𝑖𝑗𝑡
𝑘
+ 𝛽2𝑋𝑖𝑗𝑡
𝑘
+ 𝛽3𝐶𝑖𝑗𝑡
𝑘
+ 𝜐𝑘
+ 𝜃𝑗 + 𝜌𝑡 + 𝜇𝑖𝑗𝑡
𝑘
(2)
• 𝑂𝑖𝑗𝑡
𝑘
= 𝛿0 + 𝛿1𝑍𝑖𝑗𝑡
𝑘
+ 𝛿2𝑂𝑗𝑡
𝑘
+ 𝜐𝑘 + 𝜃𝑗 + 𝜌𝑡 + 𝜈𝑖𝑗𝑡
𝑘
(3)
• 𝑠𝑖𝑗𝑡
𝑘
= 1 if 𝑠𝑖𝑗𝑡
∗𝑘
> 𝑆 (4)
• 𝑦𝑖𝑗𝑡
𝑘
= 𝑦𝑖𝑗𝑡
∗𝑘
if 𝑠𝑖𝑗𝑡
𝑘
= 1 (5)
The latent variable 𝑦𝑖𝑗𝑡
∗𝑘
represents the unobserved desired level of exports by firm i
in industry k located in country j at year t

7. #2023 AGRODEP CONFERENCE
Methodology
 𝜐𝑘
and 𝜃𝑗 are industry and country fixed effect, 𝜌𝑡 year effects
 𝜀𝑖𝑗𝑡
𝑘
is the error term which includes unobservable sources of heterogeneity that
affect the firm’s desired level of exports.
 𝑠𝑖𝑗𝑡
𝑘
is an indicator variable that takes on a value of 1 if the firm is an exporter
and 0 otherwise or only if the firm’s productivity exceeds the threshold level 𝑆
Instruments
 𝐶𝑖𝑗𝑡
𝑘
, “exclusion” variable (degree to which customs and trade regulations act as
obstacles to trade) is used to identify the threshold level of firms’ productivity
 𝑂𝑗𝑡
𝑘
is the average rate of adoption of online technology by all firms other than i,
instrument for online presence and decision on how much to export.

8. #2023 AGRODEP CONFERENCE
Results and discussion
Figure 1: Percentage of firms who export
Table 1: Characteristics of exporting forms
Sales
per
worker
Managerial
experience
Foreign
ownership
share
Share of
foreign
inputs
Year
establi
shed
Below
median
12.6 15.1 16.5 14.9 23.5
Above
median
19.9 23.8 42.4 34.4 14.5

9. #2023 AGRODEP CONFERENCE
Results and discussion
Figure 2: Percent of firms who export, by firm
characteristics
Figure 3: Number of firms who think customs
regulations are obstacles to trade

10. #2023 AGRODEP CONFERENCE
Results and discussion
Total Yes (%) No (%) Missing (%)
Website 180067 50.932 48.681 0.3871
Email 180067 53.647 21.738 24.6153
Broadband 180067 17.631 6.595 75.7735
Internet 180067 9.640 0.019 90.3403
Online 180067 72.052 27.948
Table 2: Firm response to questions, by indicators
of online presence
Figure 5: Percent of exporting firms where
women are majority owners, top managers, or
majority of workforce

11. #2023 AGRODEP CONFERENCE
Results and discussion
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l)
Variables Exports Exporter Online Exports Exporter Website Exports Exporter Email Exports Exporter Broadband
Online 0.408*** 0.659***
(0.125) (0.053)
Website 0.204* 0.936***
(0.107) (0.051)
Email 0.780*** 0.784***
(0.187) (0.073)
Broadband 0.064 0.333
(0.580) (0.260)
Online–Inst. 1.797***
(0.042)
Website–Inst. 1.389***
(0.038)
Email–Inst. 1.594***
(0.060)
Broadband–Inst. 0.428***
(0.162)
Observations 76,501 76,501 76,501 76,382 76,382 76,382 41,358 41,358 41,358 11,249 11,249 11,249
Table 3: Online presence, probability of exporting and level of exports, by indicator of online presence
*** p<0.01, ** p<0.05, * p<0.1.

12. #2023 AGRODEP CONFERENCE
Results and discussion
 Having broadband has the highest effect
on the likelihood of exporting
 Having Website increases the probability
of a firm being an exporter by almost 23
percentage points
 Using email increases it by 19 percentage
points.
 Online presence can boost level of
export by 20% -78%
Figure 5: Average marginal effect of being online

13. #2023 AGRODEP CONFERENCE
Results and discussion-Heterogeneity
Firms with female top manager
 For broadband the estimation did not
converge (dropped from the analysis)
 All other online presence indicators have
statistically significant and positive effect
on the probability of exporting.
 At 10% level of statistical significance,
online presence increases export but rest
of the results are statistically insignificant
Firms with majority female workforce
 For broadband the estimation did not
converge (dropped from the analysis)
 All other online presence indicators have
statistically significant and positive effect
on the probability of exporting
 No significant effect on extent of export

14. #2023 AGRODEP CONFERENCE
Results and discussion-Heterogeneity
Firms with majority female ownership
 Apart from email, other online presence
indicators show no signficant effect on
likelihood of exporting
 No statistically significant effect on
extent of export
Small firms
 Having an online presence increases
the probability of a small enterprise
becoming an exporter by 61%-87%
 No evidence that online presence
increase the extent of export

15. #2023 AGRODEP CONFERENCE
Results and discussion-Heterogeneity
Medium-sized firms
 Online presence increases the probability
of a medium-sized enterprise becoming
an exporter
 Evidence that having an online presence
increases the level of firms’ exports
Interaction of firm sized with online
presence
 Online presence increases the probability
of exporting by all firms regardless of
the size.
 Online presence increases the level of all
firms but the effect is higher for lager
firms than smaller firms

16. #2023 AGRODEP CONFERENCE
Results and discussion-Heterogeneity
Sector of the firms
 Online presence increases the probability
of a medium-sized enterprise becoming
an exporter
 No evidence that having an online
presence increases the level of firms’
level of exports
Income level of country firms’
location
 Online presence increases the probability
of exporting by all firms in all countries
of income class, except higher income
countries
 Online presence increases the level of
firms in countries of all income class,
except lower-middle income countries

17. #2023 AGRODEP CONFERENCE
Results and discussion-Heterogeneity
Geographical location of firms
 Online presence increases the probability of firms exporting in all regions (SSA, LAC,
EAP, MENA, SA,) except Europe and Central Asia (ECA).
 Online presence increases firms’ level of exports in all regions execpt South Asia (SA).

18. #2023 AGRODEP CONFERENCE
Conclusion
Being online increases the probability of exporting by an average of 16 percentage points
and the level of a firm’s exports by at least 20%.
 Many of the results apply to firms that have traditionally struggled to enter global
markets:
 Firms owned or managed by women,
 Firms with a majority female workforce,
 Small and medium-sized enterprises,
 Firms from lower income countries and developing regions of the world,
 Firms in the services sector.
 The findings are robust to different indicators of online presence, possible endogeneity
of online presence and self-selection into exporting.

19. #2023 AGRODEP CONFERENCE
Policy recommendations
Policies to promote digitalization in low- and middle-income countries are some of the
most effective ways to support inclusive trade.
 Affordability –– share of income that users pay for entry-level fixed and mobile
broadband is five to six times greater in LIC and MIC than in high-income economies.
o Public–private partnership (PPP) to investment in ICT infrastructure
o Establishment of the appropriate legal and regulatory environment to encourage and
facilitate those investments
o Governments must accelerate citizenry’s acquisition of digital skills to enhance online
payments
o Government must strengthen data privacy and security to engender greater trust in
online transactions
o Targeted interventions addressing specific constituents such as SMES and women

20. THANK YOU