Electronic Commerce and Developing Countries: a Computable General Equilibrium Analysis

It is widely recognized that electronic commerce reduces transaction costs, increases efficiency and produces important changes in management and production process of businesses. At the macroeconomic level, there is also a growing trend among economists to agree that Business-to-Business electronic commerce can have a positive impact on productivity and growth of developed countries. This paper focuses on the quantitative analysis of the impact of electronic commerce on the global economy, when developing economies fall behind technologically and when they catch-up with developed countries. The analysis is centered on cost savings and assumes that electronic commerce can reduce costs of services, particularly, in retail and wholesale trade, transport, financial and business services. Experiments are based on a thirteensector and six-region aggregation framework, using a computable general equilibrium model, the GTAP model. Cost savings in services are simulated through a productivity growth scenario. Except for waterway transport services, the results, in general, reveal that when developing countries fall behind technologically, the income gap between developing and developed countries will increase. Developing countries will lose welfare, deteriorate in terms of trade and reduce wages. The results also point out that convergence in productivity in services offers the possibility for developing countries to increase their external competitiveness and increase output, wages and welfare.