Joël Cariolle (Ferdi)

Joël Cariolle
Ferdi, Research Fellow at the CERDI

Abstract

Submarine cables carry over 99% of international internet traffic yet remain highly vulnerable to disruption. This paper provides the first causal estimates of the macroeconomic costs of submarine cable failures and argues that they constitute a new class of digital disasters. Using novel data on cable–related internet disruptions merged with macroeconomic outcomes, I exploit the incidence and intensity of failures—primarily caused by maritime hazards—in a dynamic event–study framework covering 146 countries over 2008–2020. Results show that a single cable disruption reduces GDP per capita growth by about 2 percentage points (p.p.) on impact, cumulating to roughly a 9 p.p. loss after six years. Regarding failure intensity, each additional repair day compounds losses from about 0.2 p.p. initially to 1 p.p. over six years. Consistent with a trade–diversion mechanism, unaffected neighbors experience short- and medium-run growth gains driven by expansions in bandwidth-intensive service exports— especially financial and insurance services—while hit economies suffer persistent losses in competitiveness, including lower TFP growth, labor productivity, and inward FDI. Growth effects are heterogeneous: countries with limited connectivity infrastructure bear the costs, whereas those with network redundancy are largely insulated. Shock transmission operates through falling consumption, disrupted trade in both goods and services, and deteriorating competitiveness. Results are robust to permutation tests for non-random exposure, sequential region exclusions, and a range of additional checks.