The drivers and impediments for cross-border e-commerce in the EU

•Distance-related trade costs are greatly reduced compared to offline trade.•There is a strong increase in trade costs related to crossing linguistic borders.•The efficiency of online payments systems is an important driver for EU online trade.•Home bias is not significantly different in online mark...

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Bibliographic Details
Published in:Information economics and policy 2014-09, Vol.28, p.83-96
Main Authors: Gomez-Herrera, Estrella, Martens, Bertin, Turlea, Geomina
Format: Article
Language:English
Subjects:
Comparative advantage
Costs
Cross border transactions
E-commerce
Economics
Electronic commerce
Europe
European Union
Foreign trade
Geography
Gravity equation
International trade
Internet
Language
Linguistics
Market
Products
Studies
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Summary:•Distance-related trade costs are greatly reduced compared to offline trade.•There is a strong increase in trade costs related to crossing linguistic borders.•The efficiency of online payments systems is an important driver for EU online trade.•Home bias is not significantly different in online markets compared to offline trade. The rise of the internet is often associated with the “death of distance” or at least the decreasing relevance of geographical distance in the supply of information. We investigate whether distance still matters for online trade in physical goods. We use data from an online consumer survey panel on online cross-border trade in goods in a linguistically fragmented EU market. The analysis confirms that distance-related trade costs are greatly reduced compared to offline trade in the same goods. However, language-related trade costs increase. Moreover, online trade introduces new sources of trade costs such as parcel delivery and online payments systems. On balance, there are no indications that online trade is less biased in favour of home market products than offline trade. We examine options available to policy makers to boost cross-border e-commerce in the EU Digital Single Market. A 1% increase in the use of efficient and flexible cross-border payment systems could increase cross-border e-commerce by as much as 7%. We also show that online trade gives a comparative advantage to English-language exporting countries.
ISSN:0167-6245
1873-5975
DOI:10.1016/j.infoecopol.2014.05.002