The Value of Reputation in Trade: Evidence from Alibaba

We examine the role of an online reputation mechanism in international trade by exploring T-shirt exports on Alibaba. Exploiting rich transaction data and features of search and rating algorithms, we show that exporters displaying a superior reputation perform significantly better than peers with nearly identical true ratings and observables, and the value of reputation rises with the level of information friction and the specificity of information. We develop a dynamic reputation model with heterogeneous cross-country information friction to quantify the effect of the reputation mechanism and find a 20% increase in aggregate exports fueled by a market reallocation towards superstars.