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

41 Pages Posted: 14 May 2018 Last revised: 11 Mar 2023

See all articles by Réka Juhász

Réka Juhász

University of British Columbia (UBC); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Claudia Steinwender

Ludwig Maximilian University of Munich (LMU)

Date Written: May 2018

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.

Suggested Citation

Juhász, Réka and Steinwender, Claudia, Spinning the Web: The Impact of ICT on Trade in Intermediates and Technology Diffusion (May 2018). NBER Working Paper No. w24590, Available at SSRN: https://ssrn.com/abstract=3177950

Réka Juhász (Contact Author)

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Claudia Steinwender

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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