Tuesday , October 15 2019
Home / Uncategorized / Exporting on eBay: The Impact of Lowering the Hassle Costs of Exporting

Exporting on eBay: The Impact of Lowering the Hassle Costs of Exporting

Summary:
Getting more firms to export is a policy goal in many countries around the world. However, the trade literature has not had very many well-identified evaluations of policy interventions that facilitate exports (a notable exception being work by Atkin et al in Egypt). So I thought it would be useful to share the results of a recent experiment by Xiang Hui making it easier for sellers to export on eBay.Sellers on ebay can choose whether to offer an item for sale only to U.S. buyers, or to also make it available for international buyers (export). If they wish to sell internationally, then they need to figure out the customs and shipping process for foreign destinations.eBay introduced a new program called the Global Shipping Program (GSP) to reduce the hassle of selling abroad. Sellers participating in this program simply ship the items to a U.S. shipping center in Kentucky. A third-party company then makes sure the items are intact, and handles the whole exporting process from then, preparing the necessary customs forms, sending importing charges that have been pre-paid by buyers, and choosing a shipping service with tracking and insurance. It is free for sellers to use, and costs no more for buyers, with the third party making its money from bulk processing of these transactions.

Topics:
David McKenzie considers the following as important:

This could be interesting, too:

Bank of Japan writes Bank of Japan Accounts (October 10)

International Settlement writes Dollar exchange rate as a credit supply factor – evidence from firm-level exports

Amol Agrawal writes The history of financial development of London

Amol Agrawal writes What holds back female economists from making a career in central banking: the gender promotion gap

Getting more firms to export is a policy goal in many countries around the world. However, the trade literature has not had very many well-identified evaluations of policy interventions that facilitate exports (a notable exception being work by Atkin et al in Egypt). So I thought it would be useful to share the results of a recent experiment by Xiang Hui making it easier for sellers to export on eBay.

Sellers on ebay can choose whether to offer an item for sale only to U.S. buyers, or to also make it available for international buyers (export). If they wish to sell internationally, then they need to figure out the customs and shipping process for foreign destinations.

eBay introduced a new program called the Global Shipping Program (GSP) to reduce the hassle of selling abroad. Sellers participating in this program simply ship the items to a U.S. shipping center in Kentucky. A third-party company then makes sure the items are intact, and handles the whole exporting process from then, preparing the necessary customs forms, sending importing charges that have been pre-paid by buyers, and choosing a shipping service with tracking and insurance. It is free for sellers to use, and costs no more for buyers, with the third party making its money from bulk processing of these transactions. It began by offering service to 18 export destinations in 2013, with this expanding to 42 destinations by the end of 2013 and currently covers more than 60 destinations. The picture below shows what this looks like for a buyer in Canada:
Exporting on eBay: The Impact of Lowering the Hassle Costs of Exporting
The Experiment
Before this was rolled out to all its customers in the U.S., eBay randomly chose 20% of active users to offer the chance to early enroll in the program, using emails, banner ads, etc. to encourage take-up. In the sample sellers on average export $165 to 7.3 countries in the pre-experiment period.

Results:

  • The ITT impact is a 2.7% increase in firm-level exports
  • The increase is mostly at the extensive margin and from smaller sellers
  • In aggregate this leads to a 1.27% increase in US exports on eBay and a 1% increase in variety in foreign markets
Points to note:
The paper doesn’t discuss a lot of the details that would be standard in most write-ups of experiments –we don’t know what the sample sizes are, what the take-up rate for the encouragement design is, there is no table showing baseline balance or summary statistics, etc. But this is a massive scale-experiment – the paper does note that “The marketplace contains about 157 million buyers and 800 million live listings, with an average of 230 million clicks on item listings every day”. As a result the treatment impacts are highly significant since the standard errors are tiny.

Two key things I would note from this are: i) a relatively simple intervention can increase exports; but ii) the actual increase in exports is pretty small, and of a magnitude that is unlikely to be detectable with most firm experiments. The paper doesn’t report the summary statistics one would need for power calculations, but as a simple example, if exports to new destinations have a mean of $100 and standard deviation of $200, then to detect an increase of 2.7%, even treatment and control samples of 10,000 firms each would only have power of 0.15, and one would need 100,000 firms in treatment and control to get power of 85%. So this sort of low-cost export facilitation intervention is only going to have detectable effects in environments where massive numbers of firms are subject to it.
 

David McKenzie
Development Impact blogger, World Bank researcher focusing on small businesses and migration, All Blacks fan...

Leave a Reply

Your email address will not be published. Required fields are marked *