The COVID-19 pandemic has accelerated the shift toward digital services. Meanwhile, the race for technological and economic leadership has heated up, with risks of decoupling that could set back trade and growth and hinder the recovery from the worst global recession since the Great Depression. This paper studies the conditions under which a country may seek to erect barriers—banning imports or exports of cyber technologies—and in effect promote decoupling or deglobalization. A well-known result is that banning imports may be optimal in monopolistic sectors, such as the digital sector. The novel result of this paper is that banning exports can also be optimal, and in some cases superior, as it prevents technological diffusion to a challenger that may eventually become the global supplier, capturing monopoly rents and posing cybersecurity risks. However, export or import bans would come at a deleterious cost to the global economy. The paper concludes that fostering international cooperation, including in the cyber domain, could be key to avoiding technological and economic decoupling and securing better livelihoods.
Emmanouil Kitsios, João Tovar Jalles, and Ms. Genevieve Verdier
How can governments reduce the prevalence of cross-border tax fraud? This paper argues that the use of digital technologies offers an opportunity to reduce fraud and increase government revenue. Using data on intra-EU and world trade transactions, we present evidence that (i) cross-border trade tax fraud is non-trivial and prevalent in many countries; (ii) such fraud can be alleviated by the use of digital technologies at the border; and (iii) potential revenue gains of digitalization from reducing trade fraud could be substantial. Halving the distance to the digitalization frontier could raise revenues by over 1.5 percent of GDP in low-income developing countries.
This paper presents a set of collaborative filtering algorithms that produce product recommendations to diversify and optimize a country's export structure in support of sustainable long-term growth. The recommendation system is able to accurately predict the historical trends in export content and structure for high-growth countries, such as China, India, Poland, and Chile, over 20-year spans. As a contemporary case study, the system is applied to Paraguay, to create recommendations for the country's export diversification strategy.
Mr. Andrew Baer, Mr. Kwangwon Lee, and James Tebrake
Digitalization and the innovative use of digital technologies is changing the way we work, learn, communicate, buy and sell products. One emerging digital technology of growing importance is cloud computing. More and more businesses, governments and households are purchasing hardware and software services from a small number of large cloud computing providers. This change is having an impact on how macroeconomic data are compiled and how they are interpreted by users. Specifically, this is changing the information and communication technology (ICT) investment pattern from one where ICT investment was diversified across many industries to a more concentrated investment pattern. Additionally, this is having an impact on cross-border flows of commercial services since the cloud service provider does not need to be located in the same economic territory as the purchaser of cloud services. This paper will outline some of the methodological and compilation challenges facing statisticians and analysts, provide some tools that can be used to overcome these challenges and highlight some of the implications these changes are having on the way users of national accounts data look at investment and trade in commercial services.