Inflation Is Lower Online Than in Stores
- September 26, 2018
- CBR - Economics
Moreover, they find that the turnover in products offered online lowered inflation further.
Because the Adobe data includes the quantities of goods sold and average prices paid, Goolsbee and Klenow looked at spending on goods that were either new to the market or were offered one year but not the next. There were a lot of these: even after the researchers controlled for apparel products, which are sold seasonally, 44 percent of online sales in the data set came from new products.
The entering and exiting products had a strong impact on prices. When the researchers factored these in, inflation dropped by another 1.5 to 2.5 percentage points per year. Thus, adjusting the DPI inflation rate for new products suggests to Goolsbee and Klenow that online inflation has been more than 3 percentage points per year lower than the CPI inflation rate.
“If online pricing is fundamentally different than traditional retail, its spread could have a rising impact on the overall Consumer Price Index and, potentially, bias it,” the researchers write.
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