Information costs and trade: evidence from international electric telegraphy during the ‘golden age’ of globalisation

Abstract The role of improved information flows in facilitating international trade has been relatively neglected; this paper examines the issue in the context of international electric telegraphy during the 19th-century ‘golden age’ of globalisation. Having compiled the most comprehensive dataset of new international telegraphic connections for the period, we analyse the effect of new connections on polity-specific British trade from 1849 to 1903. We find no statistically significant effect of the telegraph on British trade overall. Our upper-bound estimate of the potential effect of the telegraph suggests that previous estimates of the effect of the telegraph network on trade are implausibly high. However, we do establish that trade between Britain and polities within the British Empire increased by an estimated 39% (48% for exports specifically), indicating that the trade-enhancing effects of the telegraph were contingent on the institutional context within which communication and trade were occurring.