Pierre-Louis Vézina

There Goes Gravity: How eBay Reduces Trade Costs

This paper compares the impact of distance, a standard proxy for trade costs, on eBay and offline international trade flows. It considers the same set of 62 countries and the same basket of goods for both types of transactions, and finds the effect of distance to be on average 65 percent smaller on the eBay online platform than offline. Using interaction variables, this difference is explained by a reduction of information and trust frictions enabled through online technology. The analysis estimates the welfare gains from a reduction in offline frictions to the level prevailing online at 29 percent on average. Remote countries that are little known, with weak institutions, high levels of income inequality, inefficient ports, and little internet penetration benefit the most, as online markets help overcome government and offline market failures.

Migrant Networks and Trade: The Vietnamese Boat People as a Natural Experiment

We provide cogent evidence for the causal pro-trade effect of migrants and in doing so establish an important link between migrant networks and long-run economic development. To this end, we exploit a unique event in human history, the exodus of the Vietnamese Boat People to the US. This episode represents an ideal natural experiment as the large immigration shock, the first wave of which comprised refugees exogenously allocated across the US, occurred over a twenty-year period during which time the US imposed a complete trade embargo on Vietnam. Following the lifting of trade restrictions in 1994, the share of US exports going to Vietnam was higher and more diversified in those US States with larger Vietnamese populations, themselves the result of larger refugee inflows 20 years earlier.

Race‐To‐The‐Bottom Tariff Cutting

Unilateral tariff liberalization accounts for the lions share of trade liberalization since the 1980s and has accompanied the most successful trade-led development model of the past 50 years, “Factory Asia”. Understanding what drove this liberalization is therefore crucial to our grasp of the process of economic development. This paper provides empirical evidence for seven Asian emerging economies from 1988 to 2006 consistent with a tariff race to the bottom driven by a competition for foreign direct investment (FDI). The identification is two-pronged. First, it is shown that tariffs on parts and components, intermediates and capital goods, crucial locational determinants for assembly firms, are correlated in competitive space, i.e. across countries at a similar level of development, but not across all countries. Second, it is shown that the tariff correlation in competitive space is significantly higher for inputs than consumer goods.

How migrant networks facilitate trade: Evidence from Swiss exports

SummaryThis paper uses Swiss immigration data and two novel instrumental variables to test the channels through which migrants promote trade. Using the immigrant stock in France as well as Swiss visa restrictions as instruments for the immigrant stock in Switzerland, I am able to exploit the cross-sectional nature of the data and identify a causal protrade effect. I find robust evidence of a protrade effect that takes place entirely on the extensive margin, i.e. on the number of exported products rather than the value of exports. This suggests migrant networks reduce beachhead costs. I also find that migrants can act as substitute for formal institutions, but not so for goods sold on organised markets. This suggests either that differentiated products are not only search- but also trust-intensive or that migrants substitute for institutions by providing information rather than trust.

Chinese networks and tariff evasion

†* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * * * * * * *

There Goes Gravity: eBay and the Death of Distance

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, eBays seller‐rating technology further reduces the distance effect on eBay.

Heckscher–Ohlin: Evidence from Virtual Trade in Value Added

The fragmentation of production chains across borders is one of the most distinctive feature of the last 30 years of globalization. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher-Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries exports across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.

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

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 Banks 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.

Ethnic minorities and trade: The Soviet Union as a natural experiment

This paper examines the role of ethnic minorities in bilateral trade between countries of the ex‐Soviet Union. We argue that both forced re‐settlement of entire ethnic groups during the Stalin era and artificially drawn borders in Central Asia led to an exogenous ethnic composition within countries. Using data collected by ethnologists on the share of ethnic groups across countries, we build an index of bilateral ethnic networks and estimate its effect on trade using a gravity model. While ethnic networks do not seem to have played a role in inter‐republic trade during the Soviet Union, we find a positive and significant effect of ethnic networks on trade in the years following the collapse of the Soviet Union. This effect, however, eroded steadily from the early 2000s.