Working Paper: NBER ID: w12242
Authors: Glenn Ellison; Sara Fisher Ellison
Abstract: Data on sales of memory modules are used to explore several aspects of e-retail demand. There is a strong relationship between e-retail sales to a given state and sales tax rates that apply to purchases from online retailers. This suggests that there is substantial substitution between online and online retail, and tax avoidance may be an important contributor to e-retail activity. Geography matters in two ways: we find some evidence that consumers prefer purchasing from firms in nearby states to benefit from faster shipping times as well as evidence of a separate preference for buying from in-state firms. Consumers appear fairly rational in some ways, but boundedly rational in others.
Keywords: e-retail; sales tax; consumer behavior; geography; online competition
JEL Codes: L8; D1; H2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shipping times (L87) | consumer preferences for local e-retailers (L81) |
| price differences (P22) | consumer reactions (D18) |
| tax differences (H20) | consumer reactions (D18) |
| bounded rationality (D01) | consumer behavior (D19) |
| higher state sales tax rates (H79) | lower e-retail sales (L81) |