The Impact of Retail E-Commerce on Relative Prices and Consumer Welfare

Yoon Jo, Misaki Matsumura and David E. Weinstein
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Yoon Jo: Texas A&M University
Misaki Matsumura: Deloitte Tax LLP
David E. Weinstein: Columbia University and NBER

The Review of Economics and Statistics, 2024, vol. 106, issue 6, 1675-1689

Abstract: This paper examines the impact of retail e-commerce on pricing behavior and welfare. Using Japanese data, we find that e-commerce lowered relative inflation rates for goods sold intensively online. We use long time series and historical catalog sales as an instrument for e-commerce sales intensity. The entry of e-commerce firms raised the rate of intercity price convergence in physical stores for goods sold intensively online, but not for other goods, which suggests e-commerce enhances price arbitrage. We estimate that e-commerce lowered variety-adjusted prices on average by 0.9% between 1996 and 2014, and more in cities with highly educated populations.

Date: 2024
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