Working Paper: NBER ID: w25695
Authors: Erik Brynjolfsson; Avinash Collis; W. Erwin Diewert; Felix Eggers; Kevin J. Fox
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.
Keywords: digital economy; welfare measurement; GDP; free goods
JEL Codes: D60; E20; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of new goods (D40) | welfare contributions of new and free goods (D69) |
| welfare gains from free services like Facebook (D69) | annual GDP growth in the U.S. (O51) |
| new goods (O39) | GDP growth estimates (O49) |
| introduction of new goods (D40) | welfare changes (I38) |
| lack of historical data on reservation prices (P22) | complicates causal inference (C32) |