E-commerce as a Potential New Engine for Growth in Asia

IMF Working Papers, July 1, 2019

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The use of e-commerce around the world has accelerated in recent years, with Asia, led by China, spearheading the rise.
Using cross-country enterprise survey data, the paper shows that firms engaged in e-commerce have higher productivity and generate a larger share of their revenues from exports than other firms.
In Asia, firms engaged in e-commerce have 30 percent higher productivity and generate about 50 percent more of their revenues from exports.
Results are robust to the use of instrumental variables, which point to potentially larger effects of e-commerce on Asian productivity and exports when essential elements are in place for its effective use.
Despite rapid growth, gaps persist in digital infrastructure and legislation, preventing many Asian countries from fully reaping the potential benefits of e-commerce.

Firms engaged in e-commerce:
- Have higher productivity (Asia: 30 percent higher productivity).
- Generate a larger share of revenues from exports (Asia: about 50 percent more of their revenues from exports).
The positive associations between e-commerce engagement and firm performance are consistent across cross-country enterprise survey data.
Instrumental variable analysis suggests amplified e-commerce effects on productivity and exports conditional on supportive infrastructure.

Findings are robust to instrumental variables estimation.
Essential elements for effective e-commerce use include:
- Reliable electricity.
- Telecommunication infrastructure.
- Transport infrastructure.
When these elements are in place, e-commerce effects on Asian productivity and exports may be larger.

To better harness e-commerce as a growth engine, policy focus should address persistent gaps in:
- Digital infrastructure.
- Legislation related to digital trade and e-commerce.
Strengthening electricity, telecommunication, and transport infrastructures is important to amplify the benefits of e-commerce for firm productivity and export performance.

Source: E-commerce as a Potential New Engine for Growth in Asia, Tidiane Kinda, July 1, 2019.