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International Trade in Online Services

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Abstract

This paper presents an innovative database of domestic and bilateral online services trade between 39 countries, including the US, the EU and some emerging market economies. It combines monetized and free online services in a single measure based on the volume of page views on websites of online service providers. We find that the online services market is geographically very fragmented. Less than 1% of all online service providers export worldwide and account for almost half of worldwide online services trade; they are mostly US-based. In the EU and other regions the share of online services imported from the US is very substantial. Conversely, in the US 32% of its online services providers export and these exports account for nearly twice as much as domestic demand. Application of the well-known gravity model of trade shows that trade frictions from geographical distance are greatly reduced in online services. However, cultural and linguistic borders are reinforced and home bias is stronger online than offline. We explain this paradox in terms of online information cost reduction and consumers quest to explore the longer tail of online supply, both at home and worldwide. Larger firms export to more markets than smaller firms. It is easier for larger online firms to reduce distance and language related trade costs; however large firms do not reduce strong online home bias. Trade costs and home bias vary considerably across services sectors though, in principle, all online services are fully tradable. The export performance of online firms is driven mostly by the comparative advantages of their home country, more so than by their own competitiveness. We conclude with some suggestions for further research.

Suggested Citation

  • Georgios Alaveras & Bertin Martens, 2015. "International Trade in Online Services," JRC Working Papers on Digital Economy 2015-08, Joint Research Centre.
    • Handle: RePEc:ipt:decwpa:2015-08
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC97233
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    Cited by:

    1. Matthias Firgo & Peter Mayerhofer & Michael Peneder & Philipp Piribauer & Peter Reschenhofer, 2018. "Beschäftigungseffekte der Digitalisierung in den Bundesländern sowie in Stadt und Land," WIFO Studies, WIFO, number 61633, March.
    2. Cote, Christine & Estrin, Saul & Shapiro, Daniel, 2020. "Expanding the international trade and investment policy agenda: the role of cities and services," LSE Research Online Documents on Economics 104003, London School of Economics and Political Science, LSE Library.
    3. Yu Wang (Avery. W) & Yi Wang & Soo Hee Lee, 2017. "The Effect of Cross-Border E-Commerce on China’s International Trade: An Empirical Study Based on Transaction Cost Analysis," Sustainability, MDPI, vol. 9(11), pages 1-13, November.
    4. Herman, Peter R. & Oliver, Sarah, 2023. "Trade, policy, and economic development in the digital economy," Journal of Development Economics, Elsevier, vol. 164(C).
    5. Christine Côté & Saul Estrin & Daniel Shapiro, 2020. "Expanding the international trade and investment policy agenda: The role of cities and services," Journal of International Business Policy, Palgrave Macmillan, vol. 3(3), pages 199-223, September.
    6. Zi Hui Yin & Chang Hwan Choi, 2023. "The effects of China’s cross-border e-commerce on its exports: a comparative analysis of goods and services trade," Electronic Commerce Research, Springer, vol. 23(1), pages 443-474, March.
    7. Ma, Shuzhong & Chai, Yuxi & Jia, Fu, 2022. "Mitigating transaction risk for cross-border e-commerce firms: A multiagent-based simulation study," International Business Review, Elsevier, vol. 31(4).
    8. ALAVERAS Georgios & DUCH BROWN Nestor & MARTENS Bertin, 2020. "Geo-blocking: Geo-blocking regulation: an assessment of its impact on the EU Digital Single Market," JRC Working Papers on Digital Economy 2020-02, Joint Research Centre.
    9. Christine Côté & Saul Estrin & Daniel Shapiro, 0. "Expanding the international trade and investment policy agenda: The role of cities and services," Journal of International Business Policy, Palgrave Macmillan, vol. 0, pages 1-25.
    10. Anatolijs Prohorovs & Marina Solesvik, 2018. "Services Sector Export in Europe," Sustainability, MDPI, vol. 10(12), pages 1-19, December.

    More about this item

    Keywords

    online services; e-commerce; online trade; international trade in services; gravity models;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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