E-commerce, Productivity and Fluctuation

This paper studies simultaneous adoption of e-commerce and its impact on productivity and economic structure in a general equilibrium model. It is found that the lower the fixed cost for establishing and maintaining e-commerce and/or the higher the degree of improvement in unit transaction efficiency through e-commerce, the more likely it is that producers will adopt e-commerce. In addition, the adoption of e-commerce can increase productivity and trade dependency, due to the benefits of fixed-cost sharing over a higher trade level and economies of specialization in production. Reduction in unit transaction cost through e-commerce can also increase the level of division of labor and promote structural changes in the economy. However, as the development of the IT sector may reduce fixed cost for e-commerce while improving unit transaction efficiency, further developments of the IT sector can generate fluctuations in economic structure and productivity through e-commerce.