Seminar: 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 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 higher for capital goods. Finally, we develop a model where firms optimize over their import strategy which yields a sufficient statistics approach 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 accounts for a quarter of that effect.