Impact of E-Commerce on Bilateral Exports of Pakistan: An Evidence from Gravity Model of Trade

Abstract

E-commerce has become a critical part of international trade as it provides online platforms to facilitate buyers and sellers across the world. However, the extent to which countries utilize e-commerce for export purposes can vary due to a range of factors. This study aims to analyse the impact of e-commerce on Pakistan's bilateral exports using the extended stochastic frontier gravity model of international trade. By analysing panel data from 60 countries over the period of 2003 to 2022, the research examines the influence of determinantal factors such as GDP, distance, e-commerce adoption, regulatory quality, infrastructure, digital literacy and bilateral exchange rates. Moreover, the study incorporates border effect and common language as dummy variables to assess their impact on bilateral trade flows. The result reveals positively significant effect of e-commerce on Pakistan’s export. It also shows positive impact of infrastructure and digital awareness on exports. However, regulatory quality and common language are insignificant. This research also estimates the export potential of Pakistan with its trading partners. It also reveals that Pakistan needs to minimize its trade gap with major neighbouring countries for potential economic growth. The study highlights areas where Pakistan can improve to boost its export performance.