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

Pei Gao and Yu-Hsiang Lei

American Economic Journal: Applied Economics, 2021, vol. 13, issue 3, 65-101

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.

JEL-codes: D83 L96 N55 N75 O13 O18 Q11 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/app.20190416

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