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GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy

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  • Brynjolfsson, Erik
  • Collis, Avinash
  • Diewert, Erwin
  • Eggers, Felix
  • FOX, Kevin J.

Abstract

The welfare contributions of the digital economy, characterized by the proliferation of new and free goods, are not well-measured in our current national accounts. We derive explicit terms for the welfare contributions of these goods and introduce a new metric, GDP-B which quantifies their benefits, rather than costs. We apply this framework to several empirical examples including Facebook and smartphone cameras and estimate their valuations through incentive-compatible choice experiments. For example, including the welfare gains from Facebook would have added between 0.05 and 0.11 percentage points to GDP-B growth per year in the US.

Suggested Citation

  • Brynjolfsson, Erik & Collis, Avinash & Diewert, Erwin & Eggers, Felix & FOX, Kevin J., 2019. "GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy," Microeconomics.ca working papers erwin_diewert-2019-6, Vancouver School of Economics, revised 27 Mar 2019.
  • Handle: RePEc:ubc:pmicro:erwin_diewert-2019-6
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    Cited by:

    1. Diane Coyle & David Nguyen, 2020. "Valuing Goods Online and Offline: the Impact of Covid-19," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2020-10, Economic Statistics Centre of Excellence (ESCoE).
    2. Richard Davies, 2021. "Prices and inflation in the UK - A new dataset," CEP Occasional Papers 55, Centre for Economic Performance, LSE.
    3. Ryan Martin, 2020. "Identifying Consumer-Welfare Changes when Online Search Platforms Change Their List of Search Results," Staff Working Papers 20-5, Bank of Canada.
    4. Byrne, David M. & Corrado, Carol A., 2020. "The increasing deflationary influence of consumer digital access services," Economics Letters, Elsevier, vol. 196(C).
    5. David Byrne & Carol Corrado, 2020. "Accounting for Innovations in Consumer Digital Services: IT Still Matters," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, National Bureau of Economic Research, Inc.
    6. Dr. Cesar R Salas-Guerra, 2021. "Impact of digital economic activity on regional economic growth: A Case study from northern Minas Gerais between 2009 To 2018," Papers 2105.02849, arXiv.org.
    7. Bertin Martens & Alexandre de Streel & Inge Graef & Thomas Tombal & Nestor Duch-Brown, 2020. "Business-to-Business data sharing: An economic and legal analysis," JRC Working Papers on Digital Economy 2020-05, Joint Research Centre (Seville site).

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    More about this item

    Keywords

    Welfare measurement; GDP; Productivity; mismeasurement; productivity slowdown; new goods; free goods; online choice experiments; GDP-B;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D60 - Microeconomics - - Welfare Economics - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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