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A Model of the Data Economy

Author

Listed:
  • Farboodi, Maryam
  • Veldkamp, Laura

Abstract

In a data economy, transactions of goods and services generate data, which is stored, traded and depreciates. How are the economics of this economy different from traditional production economies? How do these differences matter for measurement of GDP, firm values, depreciation rates, welfare and externalities? We incorporate active experimentation and data as an intangible asset to devise a tractable recursive representation of the data economy. The model rationalizes why apps are often `"free" and why even non-digital economic activity might be greater than GDP suggests. Calibrating the model using a combination of macroeconomic and financial moments suggests that the mis-measurement in US GDP due to missing value of data has been as high as 6% in 2018.

Suggested Citation

  • Farboodi, Maryam & Veldkamp, Laura, 2025. "A Model of the Data Economy," CEPR Discussion Papers 20085, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20085
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    File URL: https://cepr.org/publications/DP20085
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    Keywords

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    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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