The Impact of Socioeconomic and Cultural Differences on Online Trade
We use U.S. eBay data to investigate how trade is influenced by differences in socioeconomic characteristics, tastes, and trust. States’ similarity in cultural characteristics (ethnicity, religious affiliations, and political behavior) is predictive of online trade; cultural similarity similarly predicts trade between finer (three-digit zip code) geographies. The culture-trade relationship is mediated in part by consumers’ tastes, and is stronger for transactions with sellers who lack extensive reputations or certification, suggesting that consumers infer seller trustworthiness from cultural similarity. There is no correlation between cultural similarity and buyer satisfaction, consistent with perceived differences in trustworthiness not being validated by actual transactions.
We are grateful for eBay’s support for this research, especially Sharat Raghavan, Dimitriy Masterov, and Tom Blake. Eli Locicero provided excellent research assistance. We thank Rachel Croson, Dave Donaldson, Liran Einav, Ali Hortascu, and Avri Ravid, as well as seminar participants at the University of Southern California and the ASSA 2019 meetings, for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.