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Communication Infrastructure and Stabilizing Food Prices: Evidence from the Telegraph Network in China

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  • Pei Gao
  • Yu-Hsiang Lei

Abstract

This paper exploits a unique historical setting―the expansion of the telegraph network in nineteenth-century China when railroads were limited―to examine whether the reduction of information frictions stabilizes grain prices. Employing a difference-in-difference (DID) strategy, we find that the telegraph access (i) reduced both the magnitude and the incidence of extreme prices; (ii) mitigated price responses to local weather shocks but increased the responsiveness to shocks in other telegraph-connected regions; (iii) affected the price volatility in a mean-reverting pattern; i.e., volatility rose in previously price-stable regions, and volatility decreased in price-unstable regions.

Suggested Citation

  • Pei Gao & Yu-Hsiang Lei, 2021. "Communication Infrastructure and Stabilizing Food Prices: Evidence from the Telegraph Network in China," American Economic Journal: Applied Economics, American Economic Association, vol. 13(3), pages 65-101, July.
    • Handle: RePEc:aea:aejapp:v:13:y:2021:i:3:p:65-101
    DOI: 10.1257/app.20190416
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    Citations

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    Cited by:

    1. Yu Hao & Yuanzhe Li & John V. C. Nye, 2022. "Wiring China: The impact of telegraph construction on grain market integration in late imperial China, 1870–1911," Economic History Review, Economic History Society, vol. 75(3), pages 857-880, August.
    2. Chen, Shuo & Fan, Xinyu & Colin Xu, L. & Yan, Xun, 2023. "Competence-loyalty tradeoff under dominant minority rule: The case of Manchu rule, 1650-1911," Journal of Public Economics, Elsevier, vol. 220(C).

    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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