Speaker: Claudia Steinwender is IES Fellow at the International Economics Section at Princeton University. More »
Abstract: This paper exploits a unique historical experiment to estimate how information frictions distort international trade: the establishment of the transatlantic telegraph in 1866. I use newly collected data on cotton prices, trade and information flows from historical newspapers and find that the average and volatility of the trans-atlantic price difference fell after the telegraph, while average trade flows increased and became more volatile. I provide a trade model in which exporters use the latest news about a foreign market to forecast expected prices and estimate the efficiency gains the telegraph to be equivalent to 8% of export value.
This seminar is held jointly with the IMF.
Last Updated: Jun 22, 2015