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