Drivers of Fragmented Production Chains: Evidence from the 19th Century

Claudia Steinwender and Reka Juhasz
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Reka Juhasz: Columbia University

No 1090, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Instantaneous communication via the Internet and efficient shipping of goods across the globe are widely believed to have caused the global fragmentation of production processes that we observe today. In this paper we test this hypothesis by examining imports of intermediates and final goods in the cotton textile industry during the 19th century. This allows us to exploit exogenous variation in the roll-out of the global telegraph network and the opening of the Suez Canal in 1869 to estimate causal effects. The trade enhancing effects of reducing communication and shipping times depend on the production stage: improvements in communication time disproportionately increase imports of intermediate goods, while improvements in shipping time disproportionately increase imports of final goods.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1090

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