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Measuring the “Free” Digital Economy Within the GDP and Productivity Accounts

Author

Listed:
  • Leonard I. Nakamura
  • Jon Samuels
  • Rachel Soloveichik
Abstract
We develop an experimental methodology that values ?free? digital content through the lens of a production account and is consistent with the framework of the national accounts. We build upon the work in Nakamura, et al. (2016) by combining marketing- and advertising-supported content and find that the impact of ?free? digital content on U.S. gross domestic product (GDP) has accelerated in recent years, particularly since 2005. However, the explosion in ?free? digital content is partially offset by a decrease in ?free? print content like newspapers. Including these, real GDP growth would grow at 1.53 percent a year from 2005 to 2015 rather than the official growth rate of 1.42 percent, a tenth of a percent faster. Thus, there is a substantive impact on 2005 to 2015 real growth, even when we do not measure the full consumer surplus benefits of free goods. In addition, from 1995 to 2005, real GDP growth, including ?free? content, would grow 0.07 percentage point faster, and in the earlier period, from 1929 to 1995, 0.01 percentage point faster. We further find that the personal consumption expenditures (PCE) and core PCE deflators would have risen about 0.1 percentage point more slowly from 2005 to 2015. To analyze the impact of ?free? content on measured private business total factor productivity (TFP) growth, we account for inputs of ?free? content used in production. We find that TFP would grow faster by 0.07 percentage point per year from 2005 to 2014 and faster by 0.07 percentage point from 1995 to 2005.

Suggested Citation

  • Leonard I. Nakamura & Jon Samuels & Rachel Soloveichik, 2017. "Measuring the “Free” Digital Economy Within the GDP and Productivity Accounts," Working Papers 17-37, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:17-37
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Inflation and Price Measurement: A Primer
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-10-08 12:27:12

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    Cited by:

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    2. Daniel Sichel & Eric von Hippel, 2019. "Household Innovation, R&D, and New Measures of Intangible Capital," NBER Working Papers 25599, National Bureau of Economic Research, Inc.
    3. Byrne, David M. & Corrado, Carol A., 2020. "The increasing deflationary influence of consumer digital access services," Economics Letters, Elsevier, vol. 196(C).
    4. Bridgman, Benjamin, 2022. "Is Productivity On Vacation? The Impact Of The Digital Economy On The Value Of Leisure," Macroeconomic Dynamics, Cambridge University Press, vol. 26(1), pages 127-148, January.
    5. Maurin, Laurent & Wolski, Marcin, 2021. "Aggregate productivity slowdown in Europe: New evidence from corporate balance sheets," EIB Working Papers 2021/04, European Investment Bank (EIB).
    6. J Bayoán Santiago Calderón & Carol Robbins & Ledia Guci & Gizem Korkmaz & Brandon L. Kramer, 2022. "Measuring the Cost of Open Source Software Innovation on GitHub," BEA Working Papers 0200, Bureau of Economic Analysis.
    7. Philip Flegler & Hagen Krämer, 2021. "Das Produktivitätsparadoxon der unternehmensbezogenen Dienstleistungen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 74(03), pages 38-45, March.

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    More about this item

    Keywords

    Internet; productivity; advertising; marketing; measurement; GDP;
    All these keywords.

    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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