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The geography of payment activity on PayPal

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  • Russell Hillberry
  • Kornel Mahlstein
  • Simon Schropp

Abstract

We use data from PayPal to study the geography of online payment activity. An empirical gravity model finds a distance elasticity of −0.58 for payment value, a result that is 40% lower than typically observed in conventional trade data. The firm‐extensive margin is approximately half as sensitive to distance. The link between the scale of merchants' exports and transaction distance is considerably weaker than observed in conventional international trade data. Zipf's Law holds for PayPal merchants in some countries, but fails in smaller PayPal markets. Merchants' account ages only marginally affect the scale and average distance of their export sales.

Suggested Citation

  • Russell Hillberry & Kornel Mahlstein & Simon Schropp, 2023. "The geography of payment activity on PayPal," Review of International Economics, Wiley Blackwell, vol. 31(5), pages 1688-1718, November.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:5:p:1688-1718
    DOI: 10.1111/roie.12683
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