The Effect of Internet on Service Industry Growth and its Spillovers: Spatial Econometrics Evidence

The aim of this work is to investigate how Internet affects regional service industry and examine the influence of spatial effects of the interregion. We apply methods of spatial econometrics to examine the effect of Internet on service industry growth and its spatial spillovers between provinces. Using cross-province data for 2006, the empirical results indicate that the Internet improves the service industry growth, and spatial spillovers of the province to its neighbors are obvious which means a particular province has spatial spillover effect through the exogenous lag variable on its neighbor territory.