Economic Progress

How online commerce can help fight inequality

eBay supports business growth in places that the traditional economy does not serve well

eBay supports business growth in places that the traditional economy neglects Image: REUTERS/Thomas White

Hanne Melin Olbe
Director, Global Public Policy; Head, Public Policy Lab, Europe, Middle East and Africa, eBay
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Economic Progress

This article is part of: World Economic Forum Annual Meeting

Inequalities between citizens of the same country are becoming a greater political concern. Although income inequality between countries has dropped over the last two decades, discrepancies between regions and cities within countries have increased. This is alarming. But it’s not the full picture. Technology is empowering entrepreneurs in more disadvantaged areas, in ways the traditional economy cannot.

The gap in labour productivity - GDP per worker - between the top 10% and bottom 75% of regions has grown by almost 60% over the last two decades in OECD economies. The World Trade Organization has drawn attention to the decline in middle-skilled jobs, and work shifting to new sectors. Progress towards inclusive in-country growth and development is limited in both advanced and developing economies, as The World Economic Forum Inclusive Development Index shows.

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In the US, net enterprise growth between 2010 to 2014 was highly concentrated in a few large counties, a 2016 report by the Economic Innovation Group (EIG) found. Twenty mega-counties in just seven states contained half of all the net establishment growth.

eBay’s Public Policy Lab has studied the geographical distribution of net enterprise growth in the US, UK and Germany. It found that eBay supports business growth in places that the traditional economy does not serve very well. In disadvantaged regions, online platform connectivity can be a source of income and opportunity, where there might otherwise be none.

Between 2010 to 2014, only 41% of US counties saw an increase in the number of traditional business establishments, according to the EIG. But nearly 75% of counties saw a net increase in their number of eBay-enabled firms (commercial sellers with at least 10 transactions worth a total of $10,000 annually). Similar results held true in the UK and Germany.

For example, North-West England is far behind Greater London in its contribution to enterprise growth in the traditional economy, but not so in the platform-enabled economy. The West Midlands, Yorkshire and the Humber - regions with third-tier GDP per capita levels - saw eBay-enabled firm growth on a par with South East England, which has the highest GDP per capita.

In Germany, traditional enterprise growth is clustered in the rich southern regions of Baden-Wurtemburg and Bayern, as well as in Berlin. Yet all four of the poorest regions saw eBay-enabled firm growth.

Regional differences in GDP per capita (2013) and enterprise growth in UK, 2010 - 2015
Image: Sidley Austin analysis of eBay data, UK National Statistics, OECD Regional Outlook 2016

How can this be? Online platforms like eBay are transforming the playing field for local entrepreneurship. eBay equips hundreds of thousands of micro and small enterprises with technology to take advantage of the Internet’s global reach.

This is having a profound impact on the way geographical distance has traditionally limited opportunities for small firms. The ability to serve an entire country, continent - or in fact the whole world - is powering a new breed of enterprises: small, independent firms that are more resilient to local economic changes and less dependent on traditional conditions for growth.

Our findings make us optimistic. We are convinced that a “shared future” is indeed possible. We already see it happening. Entrepreneurs can connect freely to the Internet, access global marketplaces, use international online payment services and tap into affordable connected delivery solutions.

These four enablers are central elements of a policy agenda for inclusive economic development. Growing in-country inequalities should be addressed by ensuring access to an environment in which small and remote firms can participate in global online commerce, on their own terms. Such a policy agenda is urgently needed. A survey by the International Trade Centre of small firms engaging in online commerce identified ongoing challenges in many of these areas. Four billion people across the world remain disconnected, and there is increased domestic market protection targeting small-package trade.

The impact of technology on society will continue to be debated. What is clear is that online platforms, technology and the Internet can provide more people in more places with the tools to shape their own future.

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