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There Goes Gravity: eBay and the Death of Distance

36 Pages Posted: 7 Mar 2016  

Andreas Lendle

Graduate Institute of International and Development Studies (IHEID)

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Simon Schropp

University of St. Gallen; Sidley Austin LLP

Pierre‐Louis Vézina

University of Oxford

Date Written: March 2016

Abstract

We compare the effect of geographic distance on eBay and total international trade flows. We consider the same 61 countries and basket of goods for both types of transactions. We find the effect of distance to be on average 65% smaller on eBay. We argue this difference is due to a reduction in search costs; it increases with product differentiation and is higher when trade partners speak different languages, when corruption in the exporting country is high and when uncertainty avoidance is high in the importing country. Moreover, eBay's seller‐rating technology further reduces the distance effect on eBay.

Suggested Citation

Lendle, Andreas and Olarreaga, Marcelo and Schropp, Simon and Vézina, Pierre‐Louis, There Goes Gravity: eBay and the Death of Distance (March 2016). The Economic Journal, Vol. 126, Issue 591, pp. 406-441, 2016. Available at SSRN: https://ssrn.com/abstract=2742969 or http://dx.doi.org/10.1111/ecoj.12286

Andreas Lendle (Contact Author)

Graduate Institute of International and Development Studies (IHEID) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Marcelo Olarreaga

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Simon Schropp

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Sidley Austin LLP ( email )

Washington, DC
United States

Pierre‐Louis Vézina

University of Oxford ( email )

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