There Goes Gravity: How eBay Reduces Trade Costs

Andreas Lendle, Marcelo Olarreaga, Simon Schropp and Pierre-Louis Vézina

No 332244, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The effect of distance on cross-border flows, a standard proxy for trade costs, is 60 percent smaller on the eBay online platform than offline. The relative decline is not explained by the correlation of distance with other traditional trade cost variables, such as common legal systems and language, colonial links, transport costs, and trade agreements, but rather by a reduction of information frictions online. This loss of gravity is particularly important for remote countries with larger information asymmetries associated, for example, with higher levels of corruption, suggesting an important role for technology to help overcome market and government failures while bringing the global economy towards frictionless trade.

Keywords: International Relations/Trade; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 29
Date: 2012
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Citations: View citations in EconPapers (1)

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Working Paper: There goes gravity: how eBay reduces trade costs (2012)
Working Paper: There goes gravity: how eBay reduces trade costs (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332244

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