The Alibaba effect: Spatial consumption inequality and the welfare gains from e-commerce

By Jingting Fan, Lixin Tang, Weiming Zhu, Benteng Zou. Journal of International Economics, 2018

178 citations recorded by the source corpus.

Domestic trade costs reduce aggregate welfare and result in worse access to consumption goods in small and remote cities. As a new trade technology, e-commerce can increase inter-city trade and alleviate spatial consumption inequality because it (1) eliminates the fixed cost of market entry, and (2) reduces the effects of distance on trade costs. Using unique data from China's leading e-commerce platform, we provide evidence consistent with these two features: online trade is less hindered by distance relative to offline trade, and residents from smaller and more remote cities spend a larger fraction of their income online. We then build a multi-region general equilibrium model to quantify the impacts of e-commerce on domestic trade and welfare. We find that although it partially crowds out inter-city trade originally taking place offline, the emergence of e-commerce increases the aggregate domestic trade. The welfare gains from e-commerce are 1.6% on average, and are about 30% larger for cities in the smallest population and market potential quintiles.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/4c14f79a1af8af71e6fd2c6be28613cef1763c7d

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

  1. Meng Liu
  2. Xiang Hui
  3. Erik Brynjolfsson
  4. Daniel Rock
  5. John Van Reenen
  6. Lorin M. Hitt
  7. Prasanna B. Tambe
  8. Nicholas Bloom

Citations in the corpus