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The Value of Reputation in Trade: Evidence from Alibaba

Author

Listed:
  • Maggie X. Chen

    () (George Washington University)

  • Min Wu

    () (George Washington University)

Abstract

Information frictions are prevalent in the matching of exporters and importers. In this paper, we examine the value of reputation in international trade by exploring T-shirt exports on the worldís leading trade platform, Alibaba. We Örst present four new stylized facts about the distribution of Alibaba exports: (1) exports are exceedingly concentrated in superstar exporters; (2) the distribution of price closely mirrors the distribution of exporter reputation while the distribution of export volume is far more dispersed; (3) the distribution of export revenue becomes more dispersed as exporters age; and (4) the market share of superstar exporters diminishes with the experience of importers. Exploiting qualitative and quantitative features of Alibabaís reputation measures and Russian 2014-2015 ruble crisis, we explain the stylized facts and investigate the heterogeneous trade responses to reputation across countries and during a negative income shock. A dynamic price and reputation model further suggests that exporters use dynamic prices to ináuence the rates of reputation di§usion and export growth. Structural estimation of the model shows that the rise in aggregate exports and export concentration due to reputation is equivalent to raising the mean and variance of exporter quality by 35 and 200 percent, respectively.

Suggested Citation

  • Maggie X. Chen & Min Wu, 2016. "The Value of Reputation in Trade: Evidence from Alibaba," Working Papers 2016-20, The George Washington University, Institute for International Economic Policy.
  • Handle: RePEc:gwi:wpaper:2016-20
    as

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    File URL: https://www.gwu.edu/~iiep/assets/docs/papers/2016WP/ChenIIEPWP2016-20.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    reputation; information; superstar; and Alibaba;

    JEL classification:

    • F1 - International Economics - - Trade

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