Working Paper: NBER ID: w26010
Authors: David Byrne; Carol Corrado
Abstract: This paper develops a framework for measuring digital services in the face of ongoing innovations in the delivery of content to consumers. We capture what Brynjolfsson and Saunders (2009) call “free goods” as the capital services generated by connected consumers' stocks of IT digital goods, a service flow that augments the existing measure of personal consumption in GDP. Its value is determined by the intensity with which households use their IT capital to consume content delivered over networks, and its volume depends on the quality of the IT capital. Consumers pay for delivery services, however, and the complementarity between device use and network use enables us to develop a quality-adjusted price measure for the access services already included in GDP. \nOur new estimates imply that accounting for innovations in consumer content delivery matters: The innovations boost consumer surplus by nearly $2,000 (2017 dollars) per connected user per year for the full period of this study (1987 to 2017) and contribute .6 percentage point per year to US real GDP growth during the last ten. All told, our more complete accounting of innovations is (conservatively) estimated to have moderated the post-2007 GDP growth slowdown by .3 percentage points per year.
Keywords: digital services; consumer welfare; GDP growth; innovation measurement
JEL Codes: E01; E21; E22; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| innovations in consumer content delivery (O36) | consumer surplus (D46) |
| innovations in consumer content delivery (O36) | U.S. real GDP growth (O49) |
| innovations in consumer content delivery (O36) | moderation of post-2007 GDP growth slowdown (F62) |
| increased digital service consumption (L86) | economic indicators (E01) |