Working Paper: CEPR ID: DP9094
Authors: Andreas Lendle; Marcelo Olarreaga; Simon Schropp; Pierrelouis Vzina
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.
Keywords: eBay; gravity; online trade; trade costs
JEL Codes: F10; F13; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Distance (R12) | Trade flows (online) (F10) |
| Distance (R12) | Trade flows (offline) (F10) |
| Reduction of information and trust frictions (D83) | Distance effect (R12) |
| Distance effect (R12) | Trade flows (high corruption, low information) (F19) |
| Seller ratings (L81) | Distance effect (R12) |
| Reduction of offline information frictions (D16) | Real income (D31) |