There Goes Gravity : How eBay Reduces Trade Costs
This paper compares the impact of distance, a standard proxy for trade costs, on eBay and offline international trade flows. It considers the same set of 62 countries and the same basket of goods for both types of transactions, and finds the effect...
| Main Authors: | , , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/10/16878203/goes-gravity-ebay-reduces-trade-costs http://hdl.handle.net/10986/12107 |
| Summary: | This paper compares the impact of
distance, a standard proxy for trade costs, on eBay and
offline international trade flows. It considers the same set
of 62 countries and the same basket of goods for both types
of transactions, and finds the effect of distance to be on
average 65 percent smaller on the eBay online platform than
offline. Using interaction variables, this difference is
explained by a reduction of information and trust frictions
enabled through online technology. The analysis estimates
the welfare gains from a reduction in offline frictions to
the level prevailing online at 29 percent on average. Remote
countries that are little known, with weak institutions,
high levels of income inequality, inefficient ports, and
little internet penetration benefit the most, as online
markets help overcome government and offline market failures. |
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