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Jingting Fan and Weiming Zhu, University of Maryland; Lixin Tang, Shanghai University of Finance and Economics; and Ben Zou, Michigan State University
The Alibaba Effect: Spatial Consumption Inequality and the Welfare Gains from E-Commerce
Studies show that differential access to varieties of goods contributes to inequality in living standards across cities. By eliminating the fixed cost of entry for firms, e-Commerce might disproportionately improve smaller cities' access to varieties, and reduce this inequality. Using unique data from China's leading e-Commerce platform, Fan, Tang, Zhu, andZou first document a negative relationship between online purchasing intensity and market size. They then build a multi-region general-equilibrium model to quantify the welfare gains from e-Commerce. With an average of 1.62 percent, the welfare gains are 0.94 percentage points higher for cities in the 1st population quintile than those in the 5th quintile.