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Valuing “free” media across countries in GDP

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  • Leonard I. Nakamura
  • Rachel Soloveichik

Abstract

?Free? consumer entertainment and information from the Internet, largely supported by advertising revenues, has had a major impact on consumer behavior. Some economists believe that measured gross domestic product (GDP) growth since 2000 is too low because it excludes online entertainment (Brynjolfsson and Oh 2012; Ito 2013). Similar large effects on consumers occurred with the arrival of free radio and television entertainment. We provide an experimental methodology that uses previously established GDP measurement procedures to value advertising-supported entertainment around the world. The experimental method raises global real GDP growth, but the increase is small. It is true that advertising-supported online entertainment has grown dramatically since 2000. Concurrently, advertising-supported print entertainment has been stagnant. The net impact is a real growth rate of 7.6% per year for advertising-supported entertainment. Furthermore, advertising-supported entertainment accounts for less than 0.5% of global GDP. As a result, our experimental methodology only raises overall real GDP growth by 0.019% per year. Across countries, the experimental methodology raises nominal inequality. In 2011, nominal GDP for nations in the Organisation for Economic Co-operation and Development (OECD) increased by 0.18% more than nominal GDP in the rest of the world. Furthermore, nominal GDP in the United States increased 0.22% more than GDP in the rest of the OECD countries. However, prices for advertising-supported entertainment are also higher in wealthier nations. The net impact is a small reduction in real inequality.

Suggested Citation

  • Leonard I. Nakamura & Rachel Soloveichik, 2015. "Valuing “free” media across countries in GDP," Working Papers 15-25, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:15-25
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    References listed on IDEAS

    as
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    4. John E. Cremeans, 1980. "Consumer Services Provided By Business Through Advertising‐Supported Media In The United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 26(2), pages 151-174, June.
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    More about this item

    Keywords

    Advertising; Entertainment; Internet; Intangible; Measurement;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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