Information and Price Convergence: Telegraphs in British India
Tahir Andrabi, Sheetal Bharat, Michael Kuehlwein
BASE University Working Paper Series: 04/2021
In contrast to the literature on railways, there have been few empirical studies of the impact of telegraphs, another revolutionary technology, on price convergence. The few that exist measure the impact of telegraphs on commodity price differences between countries in the presence of a well-established efficient transportation system: ocean shipping. This paper estimates the impact of telegraphs within a developing economy, British India, with sparse, inefficient transportation. We use a rich dataset of rice and wheat prices for 192 districts between 1862 and 1920. Over 14,000 district pairs are linked by telegraph in the sample. We obtain strong evidence that, even in this context, telegraphs significantly reduced grain price dispersion before railways appeared. There were also spillover effects on neighboring districts. The combined impact of railways and telegraphs still cannot explain most of the convergence in our sample. However, the results highlight the potential importance that communication advances had on late 19th century market integration in less developed economies.