Information in the First Globalization: News Agencies and Trade

This paper investigates the impact of information frictions on trade by leveraging a major historical improvement in news transmission: the rise of global news agencies. Information available to potential traders became more abundant between countries covered by a news agency. Exploiting differences in the timing of telegraph openings and news agency coverage across country pairs, we disentangle the effect of improved information flows from that of reduced communication costs. Panel gravity estimates reveal that bilateral trade increased by 30 percent more for country pairs connected by a news agency and a telegraph than for those connected by a telegraph alone.