Macroeconomic implications of virtual shopping: a theoretical approach

Recently, parallel to developments in the communication technology, online shopping has become increasingly popular for many products, like books, CDs, software, and computers. Most analysts conjecture that the future will witness a wider basket of products and a higher trade volume via the Internet. This paper investigates the economic implications of Internet shopping in a Ricardian equilibrium framework. First, it shows the necessary and sufficient condition for the shift to Internet shopping. Next, it indicates that macroeconomic variables like consumption and income rise when this shift takes place. Thus, this paper shows that the economic implications of Internet shopping will be higher than the current experience and Internet shopping will become an important element of the `new economy\' when the bulky part of the shopping is done via the Internet.