Information and price convergence: Government telegraphs in British India

Abstract

In contrast to the abundant literature on railways, there are few studies of the impact of telegraphs—another revolutionary nineteenth-century technology—on price convergence. Most measure the impact on international commodity-price differences between developed countries given an efficient form of transportation: ocean shipping. This article estimates the impact of government telegraphs within a major developing economy—British India—which lacked efficient pre-railway transportation. We use data from almost 200 districts, collected for the period between 1862 and 1920, when over 13,000 district pairs were linked by government telegraphs. We estimate that before the introduction of railways, the presence of telegraphs reduced grain-price dispersion by 7%–13%. There were also spill-over effects on neighbouring districts, the timing of which strongly suggests causation from telegraphs to prices. The results imply that telegraphs played their own important role in the late nineteenth- and early twentieth-century market integration in the developing world. Like railroads, telegraphs in British India significantly contributed to linking geographically dispersed commodity markets to each other to create a more unified economy.