If information is free, does it still matter how far away your customer is?
Information Frictions, Internet and the Relationship between Distance and Trade
Anders Akerman, Edwin Leuven, Magne Mogstad (2021) · American Economic Journal: Applied Economics 14(1)
Article ↗ · Replication data ↗ (openICPSR)
The archive requires an account we do not hold, so the files were not opened. What follows rests on the published abstract and on this platform's own observations.
What the authors found
Akerman, Leuven and Mogstad use a Norwegian public programme that rolled out broadband access points at different times in different places, giving plausibly exogenous variation in which firms got fast internet. Broadband makes trade patterns more sensitive to distance in some dimensions and less in others: better information helps firms find and manage distant partners, but it does not abolish the frictions that distance imposes on shipping physical goods.
What our data adds
The bilateral trade matrix in this database is the object where distance shows up, and it still shows up plainly. The largest bilateral relationships remain overwhelmingly between neighbours or across single oceans: Mexico's exports to the United States were 512.7 billion dollars in 2024 and Canada's are of the same order, against far smaller flows to comparably sized economies further away. Three decades after the internet became general, the single best predictor of how much two countries trade is still how close they are.
| Figure | Value | Indicator |
|---|---|---|
| Mexico exports to the US, 2024 | 512.7bn USD | IMTS.XG_FOB_USD.A |
Every figure here is computed from observations in this database and can be charted, downloaded or queried.
What this cannot show
This is a description of the gravity regularity, not a test of the paper, which is about firm-level responses to a technology rollout within one country. Bilateral totals cannot separate information frictions from transport costs, tariffs, language or colonial history — the whole reason gravity estimation exists is that these are entangled. Our observation is consistent with the paper's conclusion that broadband did not abolish distance, and consistent with a dozen other explanations.