Internet Rising, Prices Falling: Measuring Inflation in a World of E-Commerce
AbstractThe rise of ecommerce and the contrasts between online and traditional retail pricing behavior have raised questions about potential bias in CPI inflation. Using new data on online transactions, this paper shows that aggregate matched-model inflation online from 2014–2017 was more than a full percentage point lower than in the corresponding CPI. In addition, new products were tremendously important. Quantifying the net increase in number of new goods minus the exit of old goods suggests that actual inflation online may have been an additional 1.5 to 2.5 percentage points lower than indicated in matched model price indices like the CPI.
CitationGoolsbee, Austan D., and Peter J. Klenow. 2018. "Internet Rising, Prices Falling: Measuring Inflation in a World of E-Commerce." AEA Papers and Proceedings, 108: 488-92. DOI: 10.1257/pandp.20181038
- E31 Price Level; Inflation; Deflation
- L81 Retail and Wholesale Trade; e-Commerce
- L86 Information and Internet Services; Computer Software