MACROECONOMIC EFFECTS

I. Economic Growth
Recall: GDP: C + I + G + (x-q)
1. Increase in Fixed Capital Investment
in terms of investment, to compete for the customers, all e-commerce
companies must guarantee to provide items within the scope of the time and
place specified by the customers to meet their demands, which will require a
large amount of money in related areas such as quantitative stock, transport
infrastructure, leading to the increase in fixed capital investment.
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2. More Jobs
Firstly, the development of e-commerce has led to the development of some
emerging industries such as logistics, and created more jobs in industries such
as computers and the internet, thus stimulates the consumption.
More opportunities for different industries like advertising, and courier.
Investment in e-commerce adds up to the capital stock, which makes labor
more productive
Define: Information and Communication Technology (ICT)
- ICT resources, network channels, internet connections, uses of ICT
resources in the operations, use of Internet for other processes, website, e-
commerce activities via Internet, e-commerce activities via computer
networks other than the Internet, use of mobile phones in selling and other
business operations, purchase and disposal of ICT equipment.
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 Repair of computers and communications equipment pays the highest
compensation
- Total compensation paid by other service activities sector amounted to
PHP7.7 billion, translating to an average annual compensation of
PHP103.2 thousand per employee. For establishments with TE of 20 and
over, the total compensation reached PHP2.5 billion. On the other hand,
establishments with less than 20 paid PHP5.3 billion.
- Across industry group, repair of computers and communications
equipment paid the highest average annual compensation of PHP215.2
thousand per employee, followed by domestic services and other personal
service activities, n.e.c., with a combined annual compensation of
PHP119.0 thousand. On the other hand, employees of laundry services
industry had the lowest average annual pay of PHP87.9 thousand per
employee. Figure 3 shows the average annual compensation per employee
for other service activities sector by industry group.

Among industries, personal services for wellness, except sports activities had the highest
number of employees with 52,598 (66.6%). Funeral and related activities ranked second
with 9,542 or 12.1 percent while repair of personal and household goods industry was third
 with 7,648 or 9.7 percent. Distribution of employment by industry group for the sector is
shown in Figure 2.

Employees of repair of computers and communications equipment are the most productive in
2014
- Value added per worker, a measure of labor productivity, was
valued at PHP215.0 thousand in 2014. Among industries, repair of
computers and communications equipment had the highest average of
PHP310.9 thousand. Ranked second and third were personal services for
wellness, except sports activities and funeral and related activities, with
PHP228.3 thousand and PHP202.5 thousand, respectively. Laundry
services industry posted the least value added per employee of PHP150.7
thousand.
E commerce sales amounts to PHP79.00 billion
- E-commerce refers to the selling of products or services over electronic
systems such as the Internet Protocol-based networks and other computer
networks. This is a new data item gathered in the 2012 CPBI. E-commerce
sales in 2012 reached PHP79.00 billion, accounting for 0.6 percent of total
income in 2012.
- Among the three industry groups, Services sector reported the highest
sales through e-commerce amounting to PHP60.17 billion or 76.2 percent
share to the total e-commerce sales in 2012. Eighty-nine percent of
 these were contributed by Transport and Storage registering
PHP53.42 billion sales from e-commerce. Administrative and Support
Service Activities recorded PHP2.63 billion or 4.4 percent share and
Wholesale and retail trade with PHP2.00 billion or 3.3 percent share to
the total e-commerce sales of the Services sector.
- No e-commerce sales were reported for Real Estate Activities,
Professional, Scientific and Technical Activities, Human Health and Social
Work Activities as well as for Agriculture sector in 2012.
- Among Industry sector, only Manufacturing reported e-commerce sales
amounting to PHP18.8 billion. This accounts for 0.3 percent of the
total income of the Industry sector in 2012.
- The top three regions in terms of e-commerce sales were NCR with
PHP62.31 billion (78.9%) or 0.9 percent of the total income of the region,
Central Visayas with PHP11.09 billion (14.0%) and Western Visayas with
PHP2.44 billion (3.1%). However, no e-commerce sales were reported for
Eastern Visayas and ARMM.
3. Cost Minimization of Firms
Cheaper and faster way to market E-commerce, with its efficiency and
convenience and the characteristics of breaking through the limit of time and
space.
4. Expanding exports
5. Foreign Investments
II. Impact on Monetary Policy
1. Inflation
- Low transaction costs low production costs lower prices
o E-business potential for dramatic cost savings and greater
competition can have considerable influence on the aggregate price
level. The lower costs and prices associated with the growth of e-
business have lowered inflation, at least in the short-term.
- The final way e-business affects inflation is by providing cash substitutes
such as e-payments.
(Ejs note: check revision on the RRL 3.2.2)
o Marimon, Nicolini, and Teles (2003): In their theoretical model,
competition between the central bank and the suppliers of inside
money reduces the temptation to depreciate the currency.
o When consumers can switch to the alternative money (inside
money such as e-payments, e-money, etc.), the government knows
it will lose future seigniorage revenue and the incentive to inflate
is lessened.
o While use of e-money directly reduces demand for cash and
reservable deposits, e-payments have a smaller, more indirect
effect on demand for money.
 o commentators argue that e-money is liable to weaken or destroy
the leverage central banks have over the money supply (Solomon,
1997; Quaden, 2001), the consensus among central banks is that
inside moneyat least at its scale seen to datedoes not
fundamentally change the implementation of monetary policy
(BIS, 1996; Green, 2001; Hartmann, 2006; Stracca, 2007).
o As discussed above, as non-cash forms of payment such as e-
money become more popular, demand for cash will fall and the
Federal Reserve balance sheet will shrink.
III. Impact on Fiscal Policy
- E-business as currently practiced reduces sales tax revenue for state and local
governments.
- Policymakers have expressed concern over the potential loss in sales tax reve-
nue due to e-commerce. However, for various reasons, the actual amount of
lost revenue is likely not substantial.
- Many e-firms are in industries that do not sell tax-able products, such as the
travel industry and event ticket industry. Further, e-commerce often replaces
similarly tax-exempt mail order purchases.