The telegraph, co-ordination of tramp shipping, and growth in world trade, 1870-1910

Abstract

The growth of trade after 1860 has been attributed to declining tariffs, to falling transport costs, and, recently, to monetary arrangements. However, coincident with the rise of trade the second half of the nineteenth century saw the development of the first electric communication network: the telegraph. The first successful trans-oceanic cable was operating in 1865. The telegraph remained the only direct trans-oceanic communication link until into the twentieth century. Little research has been conducted explicitly linking the impact of telegraphs on international shipping and international trade. A panel is used to show that there is a correlation between the diffusion of the telegraph, co-ordination of shipping, and the growth of world trade even controlling for the impact of other well-studied effects. The telegraph reduced the time ships spent in port and allowed ships to travel farther among ports to collect more valuable cargo.

Early globalizations: The integration of Asia in the world economy, 1800–1938

“…8 We have tried to interact it with a time trend to capture the effect of technical progress and increases in transmission (or changes in policy to set rates), but the results are poor. Our results confirm the earlier work by Lew and Cater (2006) on the positive effect of telegraph on world trade.…”

Information Frictions and the Law of One Price

“…For the first time in history, information traveled faster than goods across the Atlantic (Lew and Cater 2006). From one day to the next, communication between the United States and Great Britain was possible within only one day.…”

“…However, in the long run there might be other, additional effects: For example, Lew and Cater (2006) argue that the telegraph reduced transport costs by increasing the capacity utilization of shipping, which increased trade flows (however, using only data from after 1870). Clark and Feenstra (2003) argue that the telegraph enabled international transfer of other production technologies.…”

Is the Internet Really New After All? The Determinants of Telecommunications Diffusion in Historical Perspective

“…Yet uptake of new communication technologies may also stimulate higher levels of trade by, for example, enabling the functioning of regional and international production systems (Lew and Cater 2006;Clarke and Wallsten 2007). We deal with this problem by using a dynamic panel data estimator in which trade openness is treated as an endogenous variable (see below).…”