Entry Costs and SMEs' Exports: A Randomized Field Experiment

Abstract

I study a randomized field experiment that generates exogenous variation in the export entry cost for U.S. sellers on eBay. Specifically, eBay's global shipping program (GSP) removes sellers' hassle cost of understanding the export procedures, as eBay handles the international shipping and customs clearance for them. I identify the program's distributional impacts on sellers of different sizes using an experiment: Prior to the full launch of the GSP, 20% of eBay sellers selected randomly were offered the opportunity of early enrollments in the program. The intent-to-treat (ITT) estimates show that the program caused a 2.7% increase in exports on eBay.The effect occurred exclusively on the extensive margin of exports defined on either seller or seller-country level, and from small and medium-sized sellers. I exploit rich micro data to show that the result is driven by a reduction in entry cost, not by changes in variable cost or demand. Finally, the full launch of the GSP caused a 1% rise in product variety, a 1.2% drop in the share of negative feedback, and an increase in competition in foreign markets, which is larger for differentiated goods markets. These findings shed light on the 2012 state of the union address of facilitating exports from small and medium-sized enterprises (SME), and suggest that reducing entry costs is the key for promoting their exports.