Internet Technology and the Extensive Margin of Trade: Evidence from eBay in Emerging Economies

Andreas Lendle and Pierre-Louis Vézina

Review of Development Economics, 2015, vol. 19, issue 2, 375-386

Abstract: Online platforms such as eBay offer technologies that make it easier for firms to export. This paper dissects a new firm-level dataset that covers sales made through eBay by sellers based in 21 emerging economies to provide a new lens through which to look at the effect of trade costs on the extensive margin of trade. Comparing eBay sellers with “offline” firm-level data from the World Bank's Exporter Dynamics Database allows us to test whether the observed trade patterns on eBay fit with the trade-liberalization predictions of heterogeneous-firm models. We find that eBay firms export to more destinations, suggesting low destination-specific fixed costs on eBay. We then show that the distribution of export destinations across eBay sellers is well approximated by a balls-and-bins model of frictionless trade, suggesting eBay indeed lowers fixed export costs. Finally, we compare the gravity of eBay with that of offline trade and find geographic distance, languages, and trade agreements to matter less for online trade.

Date: 2015
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