Working Paper: NBER ID: w24590
Authors: Rka Juhsz; Claudia Steinwender
Abstract: This paper studies how information and communication technology (ICT) improvements affect trade along the value chain and international technology diffusion. We examine the impact of a revolutionary technology, the roll-out of the global telegraph network, on the 19th century cotton textile industry. First, we show that connection to the telegraph disproportionately increased trade in intermediate goods relative to final goods. We document that this was due to differences in codifiability; that is, the extent to which product specifications could be communicated at a distance using only words (and thus by sending telegrams) as opposed to inspecting a sample of the product. Second, adoption of the telegraph also facilitated international technology diffusion through the complementary mechanisms of importing machinery and acquiring knowledge of the production process and local demand through importing intermediates. These results shed light on how ICT facilitates the formation of global value chains and the diffusion of frontier technology.
Keywords: Information and Communication Technology; Trade in Intermediates; Technology Diffusion; Global Value Chains; Telegraph
JEL Codes: F14; F60; N7; O14; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Ruggedness of submarine terrain (F12) | Timing of telegraph connections (L96) |
| Timing of telegraph connections (L96) | Communication time (C41) |
| Communication time (C41) | Trade in intermediate goods (F10) |
| Communication time (C41) | Trade in finished cloth (L67) |
| Telegraph connection (L96) | International technology diffusion (O33) |
| International technology diffusion (O33) | Growth in mechanized spinning capacity by 1880 (N62) |
| Communication time (C41) | Importation of machinery (L64) |
| Communication time (C41) | Accumulation of knowledge through trade in intermediates (F12) |