Discussion Papers

No.918 Face-to-Face Communication and Production Networks: Evidence from First Trans-Siberian Flights

by Kiyoyasu Tanaka

February 2024


Face-to-face communication (FFC) helps to coordinate production chains between suppliers and manufacturers. However, the significance of FFC in production networks is not empirically clear. This paper uses the new opening of nonstop passenger flights between Tokyo and Europe over Siberian routes from 1986 as an exogenous decline in FFC costs for Japanese firms. Estimating the impact of nonstop flights on Japan’s exports in intermediate inputs for 1980-1989, I find the significantly positive impact of nonstop flights on exports; 7 more nonstop flights between Tokyo and European destinations increased the exports by 26%. The results are robust to changes in flight networks such as indirect passenger and freight flights. I show that the opening of nonstop flights contributes to exports mainly through FFC, rather than other trade costs. Thus, FFC is critical to the formation of production networks.

Keywords: Communication, trade, intermediate input, flight, Japan
JEL classification: F14, F15, R4

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