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Measuring the Impact of Free Goods on Real Household Consumption

Author

Listed:
  • Erik Brynjolfsson
  • Avinash Collis
  • W. Erwin Diewert
  • Felix Eggers
  • Kevin J. Fox

Abstract

We suggest a methodology that allows statistical agencies to form approximations to the benefits that flow to households from new free goods. The present production-oriented GDP measures are not satisfactory for measuring real household consumption and will be increasingly inaccurate as free goods, such as those made possible by the digital revolution, become more important. Advertising expenditures are not an adequate substitute for measuring the benefits of new goods to the household sector. Instead, we need to draw on estimates such as those provided by choice experiments.

Suggested Citation

  • Erik Brynjolfsson & Avinash Collis & W. Erwin Diewert & Felix Eggers & Kevin J. Fox, 2020. "Measuring the Impact of Free Goods on Real Household Consumption," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 25-30, May.
    • Handle: RePEc:aea:apandp:v:110:y:2020:p:25-30
    DOI: 10.1257/pandp.20201054
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    5. W. Erwin Diewert & Kevin J. Fox & Paul Schreyer, 2022. "Experimental Economics and the New Commodities Problem," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(4), pages 895-905, December.
    6. Erik Brynjolfsson & Avinash Collis & Felix Eggers, 2019. "Using massive online choice experiments to measure changes in well-being," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(15), pages 7250-7255, April.
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    Cited by:

    1. Arvai Kai & Mann Katja, 2022. "Consumption Inequality in the Digital Age," Working papers 890, Banque de France.
    2. Leonard I. Nakamura, 2020. "Evidence of Accelerating Mismeasurement of Growth and Inflation in the U.S. in the 21st Century," Working Papers 20-41, Federal Reserve Bank of Philadelphia.
    3. Mattsson, Pontus & Reshid, Abdulaziz, 2023. "Productivity divergence and the role of digitalisation," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 942-966.
    4. Diane Coyle & David Nguyen, 2020. "Free goods and economic welfare," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2020-18, Economic Statistics Centre of Excellence (ESCoE).
    5. Diane Coyle & Annabel Manley, 2021. "Potential social value from data: an application of discrete choice analysis," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2021-17, Economic Statistics Centre of Excellence (ESCoE).
    6. Diane Coyle & Leonard Nakamura, 2022. "Time Use, Productivity, and Household-centric Measurement of Welfare in the Digital Economy," International Productivity Monitor, Centre for the Study of Living Standards, vol. 42, pages 165-186, Spring.
    7. W. Erwin Diewert & Kevin J. Fox, 2020. "Measuring Real Consumption and CPI Bias under Lockdown Conditions," NBER Working Papers 27144, National Bureau of Economic Research, Inc.
    8. Cusolito,Ana Paula & Lederman,Daniel & Pena,Jorge O., 2020. "The Effects of Digital-Technology Adoption on Productivity and Factor Demand : Firm-level Evidence from Developing Countries," Policy Research Working Paper Series 9333, The World Bank.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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