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Spinning the Web: The Impact of ICT on Trade in Intermediates and Technology Diffusion

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  • Réka Juhász
  • 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.

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  • Réka Juhász & Claudia Steinwender, 2018. "Spinning the Web: The Impact of ICT on Trade in Intermediates and Technology Diffusion," NBER Working Papers 24590, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24590
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    Cited by:

    1. Malgouyres, Clément & Mayer, Thierry & Mazet-Sonilhac, Clément, 2021. "Technology-induced trade shocks? Evidence from broadband expansion in France," Journal of International Economics, Elsevier, vol. 133(C).
    2. O’Rourke, Kevin Hjortshøj, 2019. "Economic History and Contemporary Challenges to Globalization," The Journal of Economic History, Cambridge University Press, vol. 79(2), pages 356-382, June.
    3. Zouheir El-Sahli, 2020. "Submarine cables, the internet backbone and the trade in services," Discussion Papers 2020-05, University of Nottingham, GEP.
    4. Combes, Pierre-Philippe & Gobillon, Laurent & Zylberberg, Yanos, 2022. "Urban economics in a historical perspective: Recovering data with machine learning," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    5. David Atkin & Amit K. Khandelwal, 2020. "How Distortions Alter the Impacts of International Trade in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 213-238, August.
    6. Wache, Benjamin, 2021. "Information Frictions, Global Capital Markets, and the Telegraph," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242444, Verein für Socialpolitik / German Economic Association.
    7. A. Kerem Cosar & Latchezar Popov & Sophie Osotimehin, 2019. "Regional and Aggregate Implications of Transportation Costs and Tradability of Services," 2019 Meeting Papers 237, Society for Economic Dynamics.
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    10. Kevin Hjortshøj O'Rourke, 2018. "Economic history and contemporary challenges to globalization," Oxford Economic and Social History Working Papers _167, University of Oxford, Department of Economics.
    11. Malgouyres, Clément & Mayer, Thierry & Mazet-Sonilhac, Clément, 2021. "Technology-induced trade shocks? Evidence from broadband expansion in France," Journal of International Economics, Elsevier, vol. 133(C).
    12. Pian Shu & Claudia Steinwender, 2019. "The Impact of Trade Liberalization on Firm Productivity and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 19(1), pages 39-68.
    13. Ariu, Andrea, 2020. "Foreign Workers, Product Quality, and Trade: Evidence from a Natural Experiment," CEPR Discussion Papers 14859, C.E.P.R. Discussion Papers.
    14. Malgouyres, Clément & Mayer, Thierry & Mazet-Sonilhac, Clément, 2021. "Technology-induced trade shocks? Evidence from broadband expansion in France," Journal of International Economics, Elsevier, vol. 133(C).
    15. Combes, Pierre-Philippe & Gobillon, Laurent & Zylberberg, Yanos, 2022. "Urban economics in a historical perspective: Recovering data with machine learning," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    16. Malgouyres, Clément & Mayer, Thierry & Mazet-Sonilhac, Clément, 2021. "Technology-induced trade shocks? Evidence from broadband expansion in France," Journal of International Economics, Elsevier, vol. 133(C).
    17. Malgouyres, Clément & Mayer, Thierry & Mazet-Sonilhac, Clément, 2021. "Technology-induced trade shocks? Evidence from broadband expansion in France," Journal of International Economics, Elsevier, vol. 133(C).
    18. Sharat Ganapati, 2020. "Comment on The Servicification of the US Economy: The Role of Startups versus Incumbent Firms," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 390-396, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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