Online sales, home delivery, and the platform economy

This paper examines the income distribution and welfare effects of online sales and home delivery by considering an emerging platform economy with urban and rural regions. With a given number of urban manufacturing firms, a rise in online sales, which boosts home delivery, can reduce the wage inequality between skilled and unskilled labor in the short run. The wage gap can be narrowed further in the long run with the exit of manufacturing firms. Moreover, firm exit can mitigate the excessive number of firms in the urban manufacturing sector, thus improving the welfare of the platform economy and increasing the optimal size of online sales in the long run.