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

Author

Listed:
  • Nakamura, Leonard I.

    (Federal Reserve Bank of Philadelphia)

  • Samuels, Jon

    (U.S. Bureau of Economic Analysis)

  • Soloveichik, Rachel

    (U.S. Bureau of Economic Analysis)

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

  • Nakamura, Leonard I. & Samuels, Jon & Soloveichik, Rachel, 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

    as
    1. Nancy D. Ruggles & Richard Ruggles, 1970. "The Design of Economic Accounts," NBER Books, National Bureau of Economic Research, Inc, number rugg70-1, July.
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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

    More about this item

    Keywords

    Internet; productivity; advertising; marketing; measurement; GDP;

    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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