Fact of the Week: E-commerce has Reduced the Cost of Living in Japan by up to 1.8 Percent

Caleb Foote January 13, 2020
January 13, 2020

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Source: Yoon J. Jo, Misaki Matsumura, and David E. Weinstein, “The Impact of E-Commerce on Relative Prices and Consumer Welfare,” November 2019, NBER Working Paper No. 26506.

Commentary: A key problem in assessing the impact of e-commerce is that the goods that are commonly sold online are not random, so we cannot easily distinguish between price changes driven by e-commerce and price changes that would have happened regardless. A new study utilizes data from the Japanese consumer price index from 1991 to 2016 in order to identify the price trends of individual goods before and after they were sold intensively online. It finds that the spread of e-commerce through Japan reduced the overall cost of living by between 0.6 percent and 1.8 percent by 2017. Further, being sold intensively online causes regional disparities in a good’s prices to fall four times faster than other goods, leading to much more consistent pricing nationally.