Macroeconomics Aspects of E-Commerce

Macroeconomics Aspects of E-Commerce

Daniel Heil (Hoover Institution, USA) and James E. Prieger (Pepperdine University, USA)
DOI: 10.4018/978-1-4666-9787-4.ch165
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Background

E-commerce predates the Internet by decades. Firms began investing in electronic data interchange (EDI) systems in the 1960s. Designed to improve business-to-commerce (B2B) transactions, these systems allowed for better inventory management, reduced transactions costs, and improved communication between suppliers and purchasers (Banerjee & Gohlar, 1994). The propagation of EDI technology was relatively slow. National initiatives in the U.S. and Europe to standardize EDI systems did not begin in earnest until the mid-1970s. An international standard, the Electronic Data Interchange for Administration of Commerce and Trade (EDIFACT), was adopted by the United Nations in 1987 (Graham, Spinardi, Williams, & Webster, 1995).2 By 1990, transactions by EDI accounted for only five percent of U.S. business transactions with the majority of users representing large manufacturing firms (Banerjee & Gohlar, 1994).

The development of the Internet provided additional opportunities for firms to invest in ICT to improve B2B transactions. By 2002, e-commerce composed 16 percent of B2B transactions in the U.S. (U.S. Census, 2004). More recently, U.S. B2B e-commerce activity totaled $4.8 trillion and accounted for 38 percent of all U.S. B2B transactions and more than half the B2B in the manufacturing industry in 2012 (U.S. Census, 2014). Although large in the public’s eye, business-to-consumer (B2C) transactions traditionally represent a small (albeit growing) share of e-commerce activity. As a percent of total e-commerce activity, B2C sales increased from 7.4 percent in 2002 to 11 percent in 2012. In the latter year, retail B2C e-commerce sales totaled $593 billion dollars or 3.6 percent of total B2C sales (U.S. Census, 2004, 2014).

Key Terms in this Chapter

E-money: Originally referred to payment mechanisms that store value on a consumer’s personally held device. It now includes payment mechanism where value is stored on server that consumers can access remotely.

E-Commerce: Any use of ICT by businesses or consumers.

Crypto-Currency: Currency relying on cryptographic methods to create units of the currency and provide users with security when completing transactions and establishing ownership over particular units. Examples of the currency include bitcoin, Litecoin, Dogecoin, NXT, Bitshares, and Ethereum.

Total factor productivity: Economic growth not directly explainable by inputs like labor and capital.

Menu Costs: Costs to firms from changing listed prices for goods and services in response to changes in the price level. It is thought that e-commerce may reduce menu costs.

Seigniorage: A government’s revenue earned by its right to create money.

Sales Tax Leakage: In e-commerce, the revenue loss caused by consumers purchasing taxable goods and services from online merchants who are not required to collect sales tax for governments.

E-Payments: Any payment that is originated and received electronically.

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