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 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.

Bibliographic Details

Main Authors:	Lendle, Andreas, Schropp, Simon, Olarreaga, Marcelo, Vézina, Pierre-Louis
Language:	English en_US
Published:	World Bank, Washington, DC 2012-10
Subjects:	ACCESS TO THE INTERNET, AGGREGATE TRADE, AGGREGATE TRADE FLOWS, ASYMMETRIC INFORMATION, AUCTION, AUCTIONS, AVERAGE TARIFFS, AVERAGE TRADE, B2C, BACK UP, BASKET OF GOODS, BILATERAL IMPORTS, BILATERAL TRADE, BILATERAL TRADE DATA, BUSINESSES, BUYER, BUYERS, CHANGES IN TRADE, COMMUNICATION TECHNOLOGIES, COMMUNICATION TECHNOLOGY, CONSUMER ELECTRONICS, CONSUMER GOODS, CONSUMERS, CROSS-BORDER TRANSACTIONS, DEVELOPMENT POLICY, DIRECT SALES, E-COMMERCE, ECONOMIC RESEARCH, ELASTICITY, ELASTICITY OF SUBSTITUTION, ELASTICITY OF TRADE, EMAILS, ESP, EXPORTERS, EXPORTING COUNTRIES, EXPORTING COUNTRY, EXPORTS, FAXES, FREE TRADE, FREE TRADE AGREEMENT, FREIGHT, GDP, GINI COEFFICIENT, GLOBAL MARKETS, GLOBAL TRADE, GLOBALIZATION, GRAVITY EQUATION, GRAVITY ESTIMATES, GRAVITY FRAMEWORK, GRAVITY MODEL, GRAVITY MODELS, HOME PHONES, IMAGE, IMPACT OF TRADE, IMPORT VALUE, IMPORTING COUNTRY, INCOME, INCOME INEQUALITY, INDUSTRIAL ECONOMICS, INSTITUTION, INTERNATIONAL BANK, INTERNATIONAL TRADE, IP, LEGAL SYSTEM, LEGAL SYSTEMS, MARGINAL EFFECTS, MARKET FAILURES, MARKET STRUCTURE, NETWORKS, OCEAN TRANSPORT, ONLINE PRODUCTS, ONLINE TRANSACTIONS, OPEN ACCESS, PANEL REPORTS, PC, PHONE, POLICY RESEARCH, PRODUCT CATEGORIES, PRODUCT CATEGORY, PRODUCT DIFFERENTIATION, PRODUCT INFORMATION, PROTECTIONIST PRESSURES, REAL INCOME, REGIONALIZATION, RESULT, SEARCH RESULTS, SHIPMENTS, SHIPPING, SHIPPING COSTS, TECHNICAL ASSISTANCE, TRADE AGREEMENT, TRADE AGREEMENTS, TRADE BALANCE, TRADE COSTS, TRADE DATA, TRADE FLOWS, TRADE MODELS, TRADE MORE, TRADE PATTERNS, TRADE POLICY, USERS, USES, VIDEO, WAGES, WEB, WELFARE GAINS, WORLD MARKETS, WORLD TRADE, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2012/10/16878203/goes-gravity-ebay-reduces-trade-costs https://hdl.handle.net/10986/12107
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