The Microeconomic Impacts of E-Business on the Economy

Abstract:     
The adoption of e-business at the microeconomic level of retail, wholesale, and labor market transactions has an enormous impact on the performance of firms and the economic welfare of consumers and workers. This article reviews, in broad outlines, the economics of e-business, focusing on empirical research. The fundamental notion that e-business and adoption of ICT lowers the cost of transferring, storing, and processing information is used to organize the examination. E-business spheres of impact covered include B2C and B2B e-commerce, the labor market, and the productivity of firms. This article covers both the predicted impacts of e-business on the economy suggested by economic theory and evidence on their empirical magnitude, building a framework to under-stand why e-business has proliferated and what the economic benefits are. The article concludes with some of the new policy challenges accompanying the rewards from e-business in the economy, touching on issues of price discrimination, competition, and some disadvantages of new markets.

Keywords: e-commerce, e-business, B2C, B2B, productivity, disintermediation, price discrimination, price dispersion

JEL Classifications: D24, J64, J41, L63, O33, J24

Working Paper Series