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There goes gravity: how eBay reduces trade costs

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  • Lendle, Andreas
  • Olarreaga, Marcelo
  • Schropp, Simon
  • Vézina, Pierre-Louis

Abstract

We compare the impact of distance, a standard proxy for trade costs, on eBay and offline international trade flows. We consider the same set of 62 countries and the same basket of goods for both types of transactions. We find the effect of distance to be on average 65 percent smaller on the eBay online platform than offline. Using interaction variables, we show this difference is explained by a reduction of information and trust frictions enabled through online technology. We estimate the welfare gains from a reduction in offline frictions to the level prevailing online at 29 percent on average.

Suggested Citation

  • Lendle, Andreas & Olarreaga, Marcelo & Schropp, Simon & Vézina, Pierre-Louis, 2012. "There goes gravity: how eBay reduces trade costs," CEPR Discussion Papers 9094, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9094
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Trade and Development at ETSG
      by Dany Jaimovich - Bakary Baludin in Development Therapy on 2012-09-17 21:57:00

    Citations

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    Cited by:

    1. Nestor Duch-Brown & Bertin Martens, 2014. "Consumer benefits from the EU Digital Single Market: evidence from household appliances markets," JRC Working Papers on Digital Economy 2014-03, Joint Research Centre (Seville site).
    2. Jeon, Doh-Shin & Jullien, Bruno & Klimenko, Mikhail M., 2012. "Language, Internet and Platform Competition: the case of Search Engine," CEPR Discussion Papers 9144, C.E.P.R. Discussion Papers.
    3. Keith Head & Thierry Mayer, 2013. "What separates us? Sources of resistance to globalization," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1196-1231, November.
    4. Michail Batikas & Estrella Gomez Herrera & Bertin Martens, 2015. "Film availability in Netflix country stores in the EU," JRC Working Papers on Digital Economy 2015-11, Joint Research Centre (Seville site).
    5. Jerónimo Carballo & Alejandro Graziano & Georg Schaur & Christian Volpe Martincus, 2016. "The Border Labyrinth: Information Technologies and Trade in the Presence of Multiple Agencies," IDB Publications (Working Papers) 7691, Inter-American Development Bank.
    6. Jeon, Doh-Shin & Jullien, Bruno & Klimenko, Mikhail, 2012. "Language, Internet and Platform Competition," TSE Working Papers 12-336, Toulouse School of Economics (TSE), revised Feb 2017.
    7. Eva Hagsten & Patricia Kotnik, 2017. "ICT as facilitator of internationalisation in small- and medium-sized firms," Small Business Economics, Springer, vol. 48(2), pages 431-446, February.
    8. Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB), 2015. "Aid for Trade in Asia and the Pacific: Thinking Forward About Trade Costs and the Digital Economy," ADB Reports RPT157499-2, Asian Development Bank (ADB), revised 25 Aug 2015.
    9. Andreas Lendle & Pierre-Louis Vézina, 2015. "Internet Technology and the Extensive Margin of Trade: Evidence from eBay in Emerging Economies," Review of Development Economics, Wiley Blackwell, vol. 19(2), pages 375-386, May.
    10. Asian Development Bank Institute, 2017. "Aid for Trade in Asia and the Pacific: Thinking Forward About Trade Costs and the Digital Economy," Working Papers id:11882, eSocialSciences.
    11. Melisande Cardona & Nestor Duch-Brown & Joseph Francois & Bertin Martens & Fan Yang, 2015. "The macro-economic impact of e-commerce in the EU Digital Single Market," JRC Working Papers on Digital Economy 2015-09, Joint Research Centre (Seville site).
    12. Farole, Thomas, 2012. "Competitiveness and Connectivity: Integrating Lagging Regions in Global Markets," World Bank - Economic Premise, The World Bank, issue 93, pages 1-5, October.
    13. Jerónimo Carballo & Alejandro Graziano & Georg Schaur & Christian Volpe Martincus, 2016. "The Border Labyrinth: Information Technologies and Trade in the Presence of Multiple Agencies," IDB Publications (Working Papers) 94637, Inter-American Development Bank.
    14. Gomez-Herrera, Estrella & Martens, Bertin & Turlea, Geomina, 2014. "The drivers and impediments for cross-border e-commerce in the EU," Information Economics and Policy, Elsevier, vol. 28(C), pages 83-96.
    15. Bo Cowgill & Cosmina Dorobantu & Bertin Martens, 2013. "Does online trade live up to the promise of a borderless world? Evidence from the EU Digital Single Market," JRC Working Papers on Digital Economy 2013-08, Joint Research Centre (Seville site).
    16. Lendle, Andreas & Olarrega, Marcelo & Schropp, Simon & Vézina, Pierre-Louis, 2013. "eBay’s anatomy," Economics Letters, Elsevier, vol. 121(1), pages 115-120.
    17. Chris M Wilson, 2015. "Information Matters: Comparing Some Theoretical Determinants of Border Effects in Trade," Discussion Paper Series 2015_02, Department of Economics, Loughborough University, revised Feb 2015.
    18. Richard Pomfret & Markus Lampe & Florian Ploeckl, 2014. "Spanning the Globe: The Rise of Global Communications Systems and the First Globalisation," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 54(3), pages 242-261, November.
    19. Clemence Lenoir & Isabelle Mejean & Julien Martin, 2018. "Search Frictions in International Good Markets," 2018 Meeting Papers 878, Society for Economic Dynamics.

    More about this item

    Keywords

    eBay; Gravity; Online trade; Trade costs;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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