The Macro-Economic Impact of E-Commerce in the EU

Institute for Prospective technological Studies Digital Economy Working Paper 2014-10

24 Pages Posted: 12 Dec 2014

See all articles by Joseph F. Francois

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Bertin Martens

Joint Research Centre

Fan Yang

University of Hohenheim

Date Written: December 9, 2014

Abstract

This paper examines the impact of one transmission channel for the economic effects of a shift from offline to online consumption: cross-border trade costs. We use data on cross-border e-commerce between EU Member States to estimate the implied cross-border trade cost reduction when consumers move from offline to online consumption. We plug this trade cost estimate into a macro-sector multi-country CGE model to estimate the impact of online retailing on consumers as well as producers. We find that cross-border e-commerce increases real household consumption. However, the domestic spill-over effect squeezes price margins in the retail sector and has a negative output effect for that sector. The resulting retail sector efficiency gains have a positive effect on production in other sectors. The combined macro-economic effect of these transmission channels is generally positive for EU Member States, ranging between 0.07 and 0.25 per cent of GDP. As such, this paper adds an innovative macro-economic trade perspective to existing micro-economic estimates of the impact of e-commerce on consumer welfare. The paper does not consider several other transmission channels such as price and variety effects.

Keywords: online trade, e-commerce, CGE model, welfare effects

JEL Classification: O88

Suggested Citation

Francois, Joseph F and Martens, Bertin and Yang, Fan, The Macro-Economic Impact of E-Commerce in the EU (December 9, 2014). Institute for Prospective technological Studies Digital Economy Working Paper 2014-10. Available at SSRN: https://ssrn.com/abstract=2535842 or http://dx.doi.org/10.2139/ssrn.2535842

Joseph F Francois

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

Oppolzergasse 6
A-1010 Vienna
Austria

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 5540 (Phone)
+61 8 8223 1460 (Fax)

Bertin Martens (Contact Author)

Joint Research Centre ( email )

Edificio Expo, C
Inca Garcilaso, s/n
Sevilla, E-41092
Spain

Fan Yang

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

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