Andreas Lendle, Marcelo Olarreaga, Simon Schropp, Pierre-Louis Vézina, 04 September 2012

Geographic distance continues to encumber international trade despite advances in transportation and communication technologies. This column shows that eBay, an online market, reduces the effect of distance on trade by 65%, mainly by reducing information frictions. As consumers 'put their money where their mouse is', welfare gains are largest where they are most needed, i.e. in remote countries with bad institutions.

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