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Putting the news in New York and New Orleans: the impact of information frictions on trade

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  • James M. Harrison

    (United States Naval Academy)

Abstract

It is notoriously difficult to estimate the impact of information frictions on trade. The 1866 transatlantic telegraph connection has been used to estimate these impacts, but I demonstrate this sample violates the assumptions of an arbitrage model in ways that are likely to bias empirical result. I avoid this bias by constructing a novel dataset that meets all relevant assumptions during the 1848 rollout of the telegraph across the U.S., ultimately estimating the magnitude of the distortions on prices, quantities, and efficiency to be roughly half as large as those found in prior literature.

Suggested Citation

  • James M. Harrison, 2024. "Putting the news in New York and New Orleans: the impact of information frictions on trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(4), pages 1167-1202, November.
    • Handle: RePEc:spr:weltar:v:160:y:2024:i:4:d:10.1007_s10290-024-00527-7
    DOI: 10.1007/s10290-024-00527-7
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    References listed on IDEAS

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    More about this item

    Keywords

    Information frictions; Information technology; Commodity trade; Trade costs;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F10 - International Economics - - Trade - - - General

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