The geography of payment activity on PayPal

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 values, 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. Merchant age accounts only marginally affects the scale and average distance of export sales.