Information Frictions, Internet and the Relationship between Distance and Trade*

Anders Akerman, Edwin Leuven & Magne Mogstad

Memo 01/2018

Abstract

This paper studies how and why the adoption of information communication technology (ICT) affects bilateral trade flows. The context is a public program in Norway which rolled out broadband access points leading to plausibly exogenous variation in the availability and adoption of broadband internet by firms. We find that broadband internet makes trade patterns more sensitive to distance and economic size, and show that these results are consistent with a model of international trade with variable elasticity of demand and information frictions. Our findings shed light on the so-called “distance puzzle” in international trade.

Keywords: Internet; Trade; Information Frictions; Gravity model; Distance

[V1] February 2018, link to PDF

[V2] November 2018, link to PDF

[V3] September 2019, link to PDF

Published Feb. 15, 2018 4:25 PM - Last modified Sep. 16, 2019 4:19 PM