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

James M. Harrison ()
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James M. Harrison: United States Naval Academy

Review of World Economics (Weltwirtschaftliches Archiv), 2024, vol. 160, issue 4, No 1, 1167-1202

Abstract: 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.

Keywords: Information frictions; Information technology; Commodity trade; Trade costs (search for similar items in EconPapers)
JEL-codes: F10 F14 F15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10290-024-00527-7

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