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%. The effect on domestic sales is positive but smaller, suggesting that the impact on trade is not limited to a scale effect. We further find that the “sub-extensive” margin (number of products and sourcing countries per firm) is the main channel of adjustment. Finally, we develop a model where firms optimize over their import strategy 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 2.22% and that the import-channel, i.e. the enhanced access to foreign goods that is allowed by broadband, accounts for about 33% of that effect.