"[Jack Ma]started Alibaba in 1999, to help small firms find customers and suppliers without going through costly middlemen. Alibaba.com now claims to have 57m users, including some in nearly every country. It is sometimes likened to eBay, but is more like an online Yellow Pages… Machine-makers in Turkey or Britain use Alibaba to find cheap suppliers in China without having to go there.”
The Economist, 29 December 2010
So, did alibaba.com have a significant impact on Chinese exports? As per the story above, alibaba.com should definitely reduce search and business-matching costs, which are an important impediment to trade (Rauch and Trindade 2002, Chaney 2011).
To answer this question, I plugged the number of alibaba.com users by country in a gravity equation using 2010 data. The data on alibaba.com users comes from ninjastat and is available here. Unfortunately, it covers only about 20 countries. Still, as seen in the scatter below, the higher the number of alibaba users in a country, the higher the imports from China. The estimated coefficients suggest that a 10% increase in the number of users could increase imports from China by as much as 2.3%. What’s more, the effect remains significant when controlling for the number of ethnic-Chinese migrants in the partner country, a standard proxy for Chinese networks.
Trade costs are going down even though contract-enforcement uncertainty remains a problem.
Note: The relationship plotted above is the added-variable plot obtained after running a gravity equation with Chinese exports on the left-hand side and GDP, GDPPC, distance, Chinese migrants and number of alibaba.com users on the right-hand side.