fair Socio-Economic Impacts of Advanced Communications by: Gabriella Cattaneo, Databank Consulting Bruxelles, 24 November 1998 DATABANK CONSULTING ACTS Concertation Electronic Commerce: perspectives of development and impacts on growth

1 DATABANK CONSULTING The following considerations are based upon the FAIR projects results, reported in 50 Working Papers available at: fair Socio-Economic Impacts of Advanced Communications

2 DATABANK CONSULTING Electronic Commerce, a Universal and Ubiquitous Marketplace Evolution rather than revolution, including business complementarities and substitution New interactions within supply and distribution chains, rather than simplification of transactions New intermediation represents the largest source of new business opportunity Revenues forecasts diverge but underline the greater relevance of business-to-business

3 DATABANK CONSULTING Overview of E-Commerce Forecasts Worldwide WesternEurope (Billion ECU)

4 DATABANK CONSULTING E-Commerce Potential Multiplier Impacts on Economic and Employment Growth Earlier studies on the US economy (Cohen, 1996 reported in FAIR WP N.29) suggested that Internet based service diffusion generates indirect multiplier impacts on employment growth DBC macroeconomic analysis of the impact of E-commerce revenues in France, Germany, Italy and the UK found similar evidence

5 DATABANK CONSULTING 1. Elaboration of EITO 1997 E-commerce revenues for 1998 for the four analysed countries (approximately 4 Billion ECUs) Methodological Approach 2. Definition of the different business models (value- chains) for e-commerce by market segment 3. Definition of the corresponding business models for traditional commerce by market segment 4.Estimate of the economic impact of E-commerce vs. traditional commerce by using inter-industry modeling (Input-Output system)

6 DATABANK CONSULTING Example: Value Chains for Consumer Products Traditional Commerce

7 DATABANK CONSULTING Example: Value Chains for Consumer Products Electronic Commerce

8 DATABANK CONSULTING Inter-industry Modelling

9 DATABANK CONSULTING Main Results The 4 Billion ECU of E-Commerce 1998 revenues translate into 14.2 Billion ECU Each ECU spent in E-Commerce generates ECU in the France and UK economy and ECU in Germany and Italy

10 DATABANK CONSULTING Production Impacts Source: Databank Consulting, 1998 (1998, million ECU at 1996 prices) 1,908 2,713 1,847 7,741

11 DATABANK CONSULTING Employment Impacts Source: Databank Consulting, 1998 (1998, units, for all 4 countries)

12 DATABANK CONSULTING E-Commerce Employment Impacts in the Negative Total Substitution Scenario Source: Databank Consulting, 1998 Employment (1998, units)

13 DATABANK CONSULTING Mechanisms of New Job Creation/Destruction Employment creation: ICT-Web industries, especially applications and services, copyright industries, new intermediary services Potential traditional jobs losses: retail distribution sector, transaction industries (finance, post, advertising, travelling and transport) The net result will depend on the balance between business substitution and new markets development

14 DATABANK CONSULTING Likely to focus on white collar, high skilled jobs E-Commerce Demand of New Skills Staff in creative, managerial-administrative and direct marketing-customer service positions IT personnel combining technical and network programming skills with business application skills

15 DATABANK CONSULTING The Risk of IT Skills Shortage in Europe Note: "Equivalent" jobs include full-time ones and part-time ones aggregated Source: IDC-Microsoft Special Report, September 1998 (millions "equivalent" jobs) (millions "equivalent" jobs)

16 DATABANK CONSULTING Important conditions to maximise potential benefits are the involvement of SMEs and the encouragement of new cyber- entrepreneurs Conclusions Public policy should focus on commercial governance and measures to improve new skills creation and prevent possible personnel shortages E-Commerce has the potential to impact positively economic and employment growth in Europe Positive impacts depend on the ability to introduce innovative business models within sector value chains, stimulating new markets creation