Abstract
In this paper, we document the presence of technology-induced trade in France between 1997 and 2007 and assess its impact on consumer welfare. We use the staggered roll-out of broadband internet to estimate its causal effect on the importing behavior of affected firms. Using an event-study design, we find that broadband expansion increases firm-level imports by around 25%. We further find that the sub-extensive margin (number of products and sourcing countries per firm) is the main channel of adjustment and that the effect is larger for capital goods. Finally, we develop a model where firms optimize over their import strategy and which yields a sufficient statistics formula for the quantification of the effects of broadband on consumer welfare. Interpreted within this model, our reduced-form estimates imply that broadband internet reduced the consumer price index by 1.7% and that the import-channel, i.e. the enhanced access to foreign goods that is allowed by broadband, accounts for a quarter of that effect.
Highlights
From 1995 to 2008, the value of imports by high-income countries has grown twice as fast as global GDP.1 This acceleration of globalization has induced welldocumented labor market impacts (Autor et al, 2016b, summarize the recent literature on the impact of the “China shock” on labor market outcomes), as well as rises in consumer welfare through lower prices and gains in varieties
We find that the local access to broadband internet leads to a surge in the total value of firm-level imports
We find that broadband internet has a positive impact on firm performance as measured by value-added and sales
Summary
From 1995 to 2008, the value of imports by high-income countries has grown twice as fast as global GDP. This acceleration of globalization has induced welldocumented labor market impacts (Autor et al, 2016b, summarize the recent literature on the impact of the “China shock” on labor market outcomes), as well as rises in consumer welfare through lower prices and gains in varieties (see Feenstra and Weinstein, 2017, for a recent example). From 1995 to 2008, the value of imports by high-income countries has grown twice as fast as global GDP.1 This acceleration of globalization has induced welldocumented labor market impacts (Autor et al, 2016b, summarize the recent literature on the impact of the “China shock” on labor market outcomes), as well as rises in consumer welfare through lower prices and gains in varieties (see Feenstra and Weinstein, 2017, for a recent example). This period was characterized by radical innovations in information and communication technologies (ICT) and by their rapid diffusion throughout the world economy. We test this proposition by estimating the effect of the diffusion of broadband internet on the importing behavior of French firms from 1997 to 2007 and by developing a theoretical framework to assess the impact of broadband-induced imports on consumer welfare
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