Erik Brynjolfsson, Xiang Hui, Meng Liu, 16 September 2018

Recent years have seen dramatic progress in the predictive power of artificial intelligence in many areas, including speech recognition, but empirical evidence documenting its concrete economic effects is largely lacking. This column analyses the effect of the introduction of eBay Machine Translation on eBay’s international trade. The results show that it increased US exports on eBay to Spanish-speaking Latin American countries by 17.5%. By overriding trade-hindering language barriers, AI is already affecting productivity and trade and has significant potential to increase them further.

Marcio Cruz, Emmanuel Milet, Marcelo Olarreaga, 18 August 2017

The reduction in the cost of exporting offered by international transactions over the internet helps small firms in developing countries reach consumers all over the world. This column argues that this bias in favour of small firms has an impact on labour markets, as small firms tend to hire unskilled workers disproportionately. By levelling the playing field between small and large firms in terms of access to international markets, online trade can contribute to reducing wage and, ultimately, income inequality.

Christian Helmers, Pramila Krishnan, Manasa Patnam, 25 January 2016

The growth of e-commerce has seen an enormous increase in the choice of products available online. With recent evidence from psychology suggesting that too much choice can impede decision making, this column examines whether consumers’ online choices are consistent with models of limited attention. High-frequency, transaction-level data from an online retail store reveal that consumers are influenced by recommendations. This suggests consumers do indeed have limited attention and simplify decision making by focusing on a subset of available products.

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.

Marcelo Olarreaga, Andreas Lendle, Simon Schropp, Pierre-Louis Vézina, 19 August 2012

This paper compares the impact of distance, a standard proxy for trade costs, on eBay and offline international trade flows, finding that the effect of distance to be on average 65% smaller on the eBay online platform than offline, and that online markets can help overcome government and offline market failures.

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