The Aggregate Impact Of Online Retail
AbstractTo study the impact of online retail on aggregate welfare, I use a spatial model to calculate a new measure of store level retail productivity and each store's equilibrium response to increased competitive pressure from online retailers. The model is estimated on confidential store-level data spanning the universe of US retail stores, detailed local-level demographic data and shortest-route data between locations. From counterfactual exercises mimicking improvements in shipping and increased internet access, I estimate that improvements in online retail increased aggregate welfare from retail activities by 13.4 per cent. Roughly two-thirds of the increase can be attributed to welfare improvements holding fixed market shares, with the remainder due to reallocation. Surprisingly, 8.2 percent of firms actually benefit as they absorb market share from closed stores. Finally, I estimate that the proposed Marketplace Fairness Act would claw back roughly one-third of sales that would otherwise have gone to online retailers between 2007-12.
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Bibliographic InfoPaper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 14-23.
Length: 45 pages
Date of creation: Apr 2014
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-06-02 (All new papers)
- NEP-COM-2014-06-02 (Industrial Competition)
- NEP-URE-2014-06-02 (Urban & Real Estate Economics)
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