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No. 28: Electronic Commerce and Productivity Growth: Defining and Assessing the Linkages

by Steven Globerman, Western Washington University, April 2001


Introduction

"In general, it is thought that electronic commerce can significantly improve the efficiency of economies, enhance their competitiveness, improve the allocation of resources and increase long-term growth." (OECD, 2000, page 55)

While there is substantial disagreement about how quickly and dramatically electronic commerce (henceforth, e-commerce) will affect real income levels, there is little doubt that the emergence and growth of e-commerce promises to have substantial beneficial effects on worldwide standards of living. Since e-commerce is still in its very early stages of adoption, it is arguably foolhardy to attempt to predict the impacts it will ultimately have on real income levels, let alone the timing of these impacts. Nevertheless, policymakers must come to grips with issues such as whether and how the adoption path of e-commerce should be stimulated by government policies. As well, forecasts of future real economic growth rates may need to be modified in light of the e-commerce phenomenon, especially if e-commerce results in major improvements in economic efficiency as some experts predict.

Notwithstanding the enormous literature on e-commerce that has accumulated in both academic and trade journals, to our knowledge no systematic attempts have been made to classify and assess, even on a very preliminary basis, the linkages between e-commerce and productivity levels and growth rates. Since productivity growth is ultimately the source of higher real standards of living in society, the linkages between e-commerce and productivity should be of particular interest to policymakers. In particular, a comprehensive identification of these potential linkages could help policymakers better formulate and implement policies that might leverage larger productivity benefits from private sector investments in e-commerce activities.

Hence, the broad purpose of this study is to identify and evaluate the potential linkages between e-commerce and the productivity performance of the Canadian economy. A related purpose is to identify important public policy issues conditioning the linkages identified, and, as a related consequence, identify topics for future research consideration.

The study consists of the following sections. In the section entitled "Defining the Concepts," we set out some definitions of e-commerce and productivity, as well as some historical data on the two phenomena, by way of background. The section entitled "Linking e-commerce to Productivity Growth" describes a conceptual framework within which the major linkages between e-commerce and productivity performance might be identified and evaluated. The section entitled "Assessing the Linkages" discusses some preliminary evidence bearing upon the nature and magnitude of the linkages identified in the preceding section. The last section, entitled "Policy Issues", identifies and briefly discusses several prominent policy issues.

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