Can Online Markets Make Trade More Inclusive?
Technology-driven online trade reduces income inequality and makes trade more inclusive. To fully realize these new gains from trade, governments and export promotion agencies need to address remaining barriers to e-commerce.
Technology made available by online markets has significantly reduced the cost of entry into international markets for small and medium-sized firms, who can now reach far away consumers and create a global reputation as a seller at very low costs. Empirical evidence using data from eBay sellers shows that a large share of online firms export, even though they are on average smaller than traditional offline firms. We show that in a world where income inequality is driven by an uneven distribution of capital rents, online markets help to reduce income inequality by providing smaller firms access to international markets.
WORKING PAPER NO: 742