ICT and Exporting: The Effects of Broadband on the Extensive Margin of Business Service Exports

Kneller, Richard; Timmis, Jonathan

doi:10.1111/roie.12237

Cited by 50 publications

(34 citation statements)

References 48 publications

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“…Focusing on how behind-the-border procedures influence trade flows, researchers find effects comparable or even higher than the ones found for border measures such as tariffs (Freund and Rocha, 2011;Hoekman and Nicita, 2011;Portugal-Perez and Wilson, 2012;Beverelli et al, 2015;Umana-Dajud, 2019). 7 More related to our study, the literature has recently began to examine the impact of the internet on international trade, finding substantial effects on firm-level exports (Kneller and Timmis, 2016;Fernandes et al, 2019) and imports (Malgouyres et al, 2019). 8 We contribute to this literature by providing the first look at the effect of digitization on processing trade, alongside its downstream spillovers.…”

Section: Introductionsupporting

confidence: 52%

Made and Created in China: Super Processors and Two-way Heterogeneity

Chen

Erbahar

2019

SSRN Journal

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In this paper, we show that there exists a special breed of firms that are active in both ordinary and processing exports. Contrary to the existing literature that describes processing firms as inferior, these mixed firms are superior to other firms in multiple dimensions, and hence we call them "super processors." We build on Antràs et al. (2017) and Bernard et al. (2019) to develop a model in which firms are heterogeneous in multiple stages of production. Firms endogenously choose to become suppliers or final good producers, and those that excel in both manufacturing ability and blueprint quality choose to engage in both activities. We test our model's central prediction by exploiting China's pilot "paperless" processing trade supervision program that lowered the cost of processing trade but left ordinary trade costs unchanged.We find that facilitating processing exports induces productive domestic downstream firms to establish their own trademarks. Our results highlight that processing trade not only leads goods to be "Made in China," but also "Created in China." JEL codes: F1, F12, F13, F14, L11, L21 3 Fernandes and Tang (2015) find that processing firms are less diversified in products and destinations when compared to ordinary exporters, and Yu (2015) shows that their productivity does not change considerably with trade liberalization. Dai et al. (2016) find that compared to non-exporters and ordinary exporters, processing firms have lower revenue productivity, skill intensity, and profitability, and they pay lower wages and spend little on R&D. However, emphasizing that revenue-based total factor productivity (TFP) calculations are confounded by price effects, and thus do not reflect "true" productivity, Li et al. (2018) calculate TFP based on quantity data and find that processing exporters are significantly more productive than non-exporters.4 Yu (2015), Dai et al. (2016), andLi et al. (2018) do include mixed firms (referred to as "hybrid" firms) in their analysis but do not focus on them.

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Section: Introductionsupporting

confidence: 52%

Made and Created in China: Super Processors and Two-way Heterogeneity

Chen

Erbahar

2019

SSRN Journal

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“…2 There are some recent exceptions that have documented the effect of technology using firm-level trade and outsourcing decisions. Kneller and Timmis (2016) find a positive effect of broadband internet on the export of services. Fort (2017) documents the firm-level relationship between investing in an electronicintegrated network and outsourcing, either domestic or international, of complex manufacturing tasks.…”

Section: Literaturementioning

confidence: 86%

Technology-Induced Trade Shocks? Evidence from Broadband Expansion in France

2019

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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.

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“…In terms of firm sector, ICT forms a crucial role in modern manufacturing, which is increasingly an interconnected activity with firms using the inputs crossing borders and firms many times along the way to a finished product. Whilst some services continue to rely heavily on face-to-face contact and networks of customers or potential employees, ICT has enabled firms to trade business service activities (Kneller and Timmis, 2016). Notes: 2SLS regressions using firm-level data for 2000 from the CiTDB database for wave 1 exchangesthose that are connected to telephone exchanges that were ADSL enabled by the end of 2001 (wave 1).…”

Section: Heterogeneitymentioning

confidence: 99%

Broadband infrastructure, ICT use and firm performance: Evidence for UK firms

DeStefano

Kneller

Timmis

2018

Journal of Economic Behavior & Organization

Self Cite

151

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The recent economics literature has begun to recognise that ICT is a heterogeneous technology altering information storage, processing and communication in distinct ways. In this paper we use the arrival of a new communication technology, ADSL broadband, to study the effects of heterogeneous types of ICT on firm performance. To do so free from endogeneity bias, we construct instruments using postcode-level geographic variation in the infrastructure underlying broadband internetthe pre-existing telephone network. We show that after placing various restrictions on the sample, instruments based on the timing of ADSL broadband enablement and the cable distance to the local telephone exchange satisfy the conditions for instrument relevancy and validity. We find in turn, that ICT causally affects firm size (captured by either sales or employment) but not productivity.

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ICT and Exporting: The Effects of Broadband on the Extensive Margin of Business Service Exports

Cited by 50 publications

References 48 publications

Made and Created in China: Super Processors and Two-way Heterogeneity

Made and Created in China: Super Processors and Two-way Heterogeneity

Technology-Induced Trade Shocks? Evidence from Broadband Expansion in France

Broadband infrastructure, ICT use and firm performance: Evidence for UK firms

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