Does Online Trade Live Up to the Promise of a Borderless World? Evidence from the EU Digital Single Market

24 Pages Posted: 4 Jan 2014

See all articles by Bo Cowgill

Bo Cowgill

University of California, Berkeley

Cosmina L. Dorobantu

Reed College - Department of Economics

Bertin Martens

Joint Research Centre

Date Written: November 18, 2013

Abstract

An important EU Digital Single Market policy objective is to achieve an open and integrated market for online e-commerce in the EU, to make it easy for consumers to go outside their domestic market and shop online in other EU Member States. This study applies a standard gravity model of international trade to Google e-commerce data to estimate the prevalence of home bias in online shopping in the EU. It compares how much EU Member States trade domestically and with other Member States, and how much the EU trades with itself and with the rest of the world. The research confirms the findings of the (offline) international trade literature, according to which there is strong home bias. There is no unambiguous evidence about the strengths or weaknesses of the EU Digital Single Market. Strong intra-EU home bias suggests that online consumers have a tendency to stay in their home country market. Equally strong extra-EU home bias suggests that online consumers who do decide to shop abroad have a tendency to stay in the EU however, rather than going to a non-EU country. There are indications that online home bias is lower in a comparable cross-border trade setting in North America. Data and methodological limitations do not allow a more detailed analysis.

Keywords: online trade, EU single market, e-commerce, home bias, online shopping

JEL Classification: F15, O52

Suggested Citation

Cowgill, Bo and Dorobantu, Cosmina L. and Martens, Bertin, Does Online Trade Live Up to the Promise of a Borderless World? Evidence from the EU Digital Single Market (November 18, 2013). Available at SSRN: https://ssrn.com/abstract=2374292 or http://dx.doi.org/10.2139/ssrn.2374292

Bo Cowgill

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Cosmina L. Dorobantu

Reed College - Department of Economics ( email )

3203 SE Woodstock Boulevard
Portland, OR 97202-8199
United States

Bertin Martens (Contact Author)

Joint Research Centre ( email )

Edificio Expo, C
Inca Garcilaso, s/n
Sevilla, E-41092
Spain

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