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

Réka Juhász and Claudia Steinwender

No 24590, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F14 F60 N7 O14 O33 (search for similar items in EconPapers)
Date: 2018-05
New Economics Papers: this item is included in nep-cse, nep-his, nep-ict, nep-int, nep-knm, nep-pay and nep-tid
Note: DAE ITI PR
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Citations: View citations in EconPapers (34)

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