36 Pages Posted: 7 Mar 2016
Date Written: March 2016
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: 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
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