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.
Illustration Photo: e-commerce (Public Domain from Pixabay.com)