Abstract
Reducing transaction costs by means of policy intervention could generate comparative advantages and contribute to the growth of international trade. Chinese government agencies have introduced a number of policies in support of rapidly growing cross-border e-commerce to promote China’s international trade. However, the previous literature has not empirically verified the precise effect of these policies on the growth of international trade while focusing on the impact of cross-border e-commerce on trade distance and consumer welfare. To address this gap, this paper investigates the impact of cross-border e-commerce on international trade in the context of China, mainly from the perspective of transaction cost economics in conjunction with the traditional comparative advantage model by analyzing information cost, negotiation cost, transportation cost, tariffs and middlemen cost separately. Firstly, the new theoretical model suggests that cross-border e-commerce may have a positive role in promoting international trade only when the negative impact caused by tariff cost and transportation cost is offset. Secondly, our result shows that cross-border e-commerce has a positive effect on the growth of China’s international trade in each year. However, the positive effect does not show incremental growth over time, possibly as a result of the weak implementation of favorable policies in trade, in addition to global trade shrinking.
Highlights
With the advance of Internet technology, e-commerce has earned an accelerated growth over the past ten years
We propose a new theoretical framework of international trade by incorporating various types of transaction costs with the traditional model of comparative advantage to provide an empirical analysis for explaining the relationship between cross-border e-commerce and international trade in the context of China
This paper investigates the impact of cross-border e-commerce on international trade mainly from the perspective of information cost, negotiation cost, transportation cost, tariffs and middlemen cost
Summary
With the advance of Internet technology, e-commerce has earned an accelerated growth over the past ten years. In the first half of 2016, China’s cross-border e-commerce reached a scale of 2.6 trillion Yuan with a year-on-year growth of 30%, accounting for 23% of the total import and export trade of China. We propose a new theoretical framework of international trade by incorporating various types of transaction costs with the traditional model of comparative advantage to provide an empirical analysis for explaining the relationship between cross-border e-commerce and international trade in the context of China. The positive effect of cross-border e-commerce on international trade does not increase over time as a result of favorable policies, the relationship is positive in each year.
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