DP13847 Technology-induced Trade Shocks? Evidence from Broadband Expansion in France

Author(s): Clément Malgouyres, Thierry Mayer, Clément Mazet
Publication Date: July 2019
Keyword(s): consumer welfare, Imports, internet, Trade
JEL(s): F14, F15, F61, F66, L23, O33
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13847

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.