1. Jennifer Ribarsky U.S. BEA (Formerly OECD)
measuring GDP in a digitalised Economy Proposal for a Satellite account
5th World KLEMS Conference
4 – 5 June 2018, Boston
Jennifer Ribarsky
U.S. BEA (Formerly OECD)

2. Background
Market capitalisation of Airbnb (£ Billions)
Increased prevalence of ‘new’ transformative (digital) technologies
But….
…. Declining productivity
Trend labour productivity growth
You are probably familiar with the background of this discussion. Recent years have seen a rapid emergence of disruptive technologies involving new forms of intermediation, services delivery, and consumption. These new platforms that facilitate peer to peer transactions such as Airbnb and Uber.
So in essence we have seen rapid technological change but we have seen in many countries a decline in productivity.
Is it a transitional phenomenon, longer-term condition, or…

3. The mis-measurement hypothesis (MMH)
Charles Hulten: Valuing the Net and the wide range of applications… is challenging…. and their omission or undervaluation surely affects GDP.”
Why we’re measuring the digital economy in the wrong way
The U.S. Underestimates Growth
Charlie Bean: “statistics have failed to keep pace with the impact of digital technology”
Some optimists argue instead that the problem is one of measurement. Technological progress often raises productivity in ways that statistical agencies struggle to detect
Diane Coyle: The pace of change in OECD countries is making the existing statistical framework decreasingly appropriate for measuring the economy
The internet and the productivity slump

4. Potential mismeasurement issues
GDP is an adequate concept to measure market production, but concerns have arisen over a number of areas…
Prices and volumes
New forms of intermediation service
Free and subsidised consumer products
Consumers as producers
Data as an asset?
Cross border flows
All these areas are being investigated as part of the work plan of the OECD, IMF, Eurostat, and the Advisory Group

5. Where is the digital economy in macroeconomic statistics?
Digital transformation is critical to success of national economies, as a source of growth, enabler of trade, and key to competitiveness…
Yet, economic evidence in official statistics is limited.
U.S. International Trade Commission estimated that in 2011, digital trade increased U.S. GDP by between $517 billion and $711 billion (3.4 percent to 4.8 percent); increased average wages by 4.5 to 5.0 percent; and was the catalyst for the creation of up to 2.4 million jobs. (USITC, 2014)
There is a growing recognition that the role of digitalisation in our statistics is not sufficiently visible, which appears, at least in part, to be fuelling the perception that mismeasurement of digitalised transactions is occurring.
A clear need in this respect, to alleviate these concerns and perceptions, is to better identify the part of the digital economy that is already within official statistics.

6. International statistical community response
OECD Measuring GDP in a Digitalised Economy
OECD-IMF Can potential mismeasurement of the digital economy explain the post-crisis slowdown in GDP and productivity growth?
OECD-IMF Measuring Consumer Inflation in a Digital Economy
Advisory Group on measuring GDP in a digitalised economy
Consists of NSOs (members of OECD WPNA), Eurostat, IMF, UN, and members of OECD WPMADE
On-line discussions and in-person meeting 10 November 2017
Conducted various surveys of country practices
TF on International Trade in Services Statistics (TFITS) exploring similar issues
The OECD paper finds the conceptual framework of the SNA is robust enough to handle measuring the digital economy. But there could be some longstanding measurement issues to address especially in the area of price and volume measurement, which may have been exacerbated by digitalisation.
The paper discusses the framework of national accounts and describes the difference between production (which GDP is a measure of) vs. consumer surplus vs welfare
The joint papers by the OECD-IMF try to quantify some of the potential impacts and demonstrate, even with relatively extreme assumptions of potential mismeasurement, that the productivity slowdown, at least, cannot be explained away by mismeasurement

7. Advisory Group on Measuring GDP in a Digitalised Economy
Main objectives
Defining a measurement framework within the system of national accounts (a satellite account), to monitor the “digital economy”
Implementation of the framework, including identifying potential data gaps
But what is the digital economy? What should we look at?

8. OECD’s Proposed Measurement Framework (Satellite Account)

9. Proposed Framework: Dimensions of the digital economy

10. Nature of transaction (‘how’)
Nature of the transaction is organising principle, but … doesn’t dictate what should be digital goods and services or digital industries
Digitally ordered: The sale or purchase of a good or service, conducted over computer networks by methods specifically designed for the purpose of receiving or placing orders (follows OECD e-commerce definition)
Platform enabled: Transactions that are facilitated via online intermediary platforms that match buyer and supplier (e.g. eBay, Amazon, Uber); platform may be based domestically or abroad, foreign or domestically owned
Digitally delivered: ‘downloadable’ services and data flows (software, data, database services, etc.)
Basis for digital trade framework
Visible economic transaction… to be inscope needs to reflect at least one of the following: digitally ordered, platform enabled, and digitally delivered.

11. Proposed Framework: General Information
Basically supply and use tables with further breakdowns of products and producers, which are considered relevant for describing the “digital economy”
Supply table: for each product, total supply broken down by domestic producers (industries) and imports
Use table: for each product, total use broken down by domestic producers (intermediate consumption), final consumption, investments, and exports
How the transaction is conducted
To address broader issues, the Framework also includes “free” digital services, including data that are not in the current SNA framework
Broken down into goods and services
Further broken down into digital and non-digital
whether the services are delivered for free, for example non-monetary transactions data
--total purchases of digital goods – and by type of demand (intermediate/final demand);
--total purchases of digital services - and by type of demand (intermediate/final demand); and
--total value of e-commerce purchases (digitally ordered goods and services), and because the satellite account asks for both purchasers and basic ---price valuations, the total value of the associated ‘distribution’ or ‘intermediation’ margin generated by digital intermediary platforms.
--Imputed value of free digital services, by households and industries.
Also differentiates platforms on the basis of whether they are resident or non-resident; and whether the underlying goods or services were produced domestically or abroad.
E-commerce trade facilitated by non-resident platforms
• total purchases of digital goods – and by type of demand (intermediate/final demand);
• total purchases of digital services - and by type of demand (intermediate/final demand); and
• total value of e-commerce purchases (digitally ordered goods and services), and because the satellite account asks for both purchasers and basic price valuations, the total value of the associated ‘distribution’ or ‘intermediation’ margin generated by digital intermediary platforms.
• Imputed value of free digital services, by households and industries.
In the SA no distinction for platform enabled goods transactions (although there is a distinction between basic price and purchases price)

12. Digital economy typology
The majority of the AG agreed with the multi-dimensional scope proposed
Satellite account designed to be flexible:
Doesn’t define the digital economy but highlights important transactions (and transactors)
Deliberately ambitious, with wide coverage, at this stage, to ensure comprehensive discussion on scope, with further expansions being developed on:
Gross and net capital stock estimates and capital services
Price and volume measure
Refinements will be needed, based also on national initiatives, to make it operational (i.e. practical) for a satellite account on the digital economy; i.e. some phenomena may be viewed as being
out of scope; not economically significant or of policy relevance for separate identification (now and in the future); not measurable (including in the future).

13. Making the Proposed Measurement Framework Operational BEA’s Digital Economy Estimates

14. BEA’s exploratory digital economy estimates
First U.S. digital economy estimates created within a
supply-use framework.
No digital economy satellite account (DESA) yet, but the creation of these exploratory estimates is potentially the first step towards a future DESA.
BEA thanks the
National Telecommunications and Information Administration (NTIA)
for funding a portion of the project.

15. BEA’s Implementation
BEA’s initial estimates for digital economy include:
Digital-enabling infrastructure: the goods and services needed for an interconnected computer network to exist and operate.
Hardware
Software
Telecommunications equipment and services
Structures
The Internet of Things (IoT)
Support services
E-commerce: the digital transactions that take place using that system.
Business-to-business
Business-to-consumer
Peer-to-peer
Digital media: the content that digital economy users create and access.
Direct sale
Free
Big data

16. Results: Digital Economy Share of GDP
Share of total gross domestic product, 2016
The digital economy accounted
for 6.5%
($1.21 trillion) of total U.S. GDP in 2016.
2016, Digital economy share of total GDP was 6.5%, similar to professional, scientific, and technical services and wholesale trade industries.
12/31/2018

17. Results: Components of the Digital Economy
Current-dollar value added share of total digital economy, 2016
In 2016, digital‐enabling infrastructure, or the hardware, software, telecommunications and support services that allow the digital economy to exist, accounted for $1,072.6 billion (88.7 percent) of the total estimated $1,209.2 billion in digital economy current‐dollar value added. Digital economy support services totaled $362.2 billion (30.0 percent) of the total digital economy, telecommunications totaled $320.4 billion (26 percent), software totaled $258.8 billion (21.4 percent), and hardware totaled $131.3 billion (10.9 percent) (chart 6). E‐commerce and digital media accounted for the remaining $136.5 billion (11.3 percent) of the total digital economy current‐dollar value added. Services dominated the digital economy, relative to goods, accounting for 87.5 percent of total digital economy current‐dollar value added.
In 2016, digital‐enabling infrastructure accounted for $1,072.6 billion (88.7 percent) of the total estimated $1,209.2 billion in digital economy current‐dollar value added. E‐commerce and digital media accounted for the remaining $136.5 billion (11.3 percent).
12/31/2018

18. Results: Digital Economy Growth
Real Value Added
2016, Digital economy share of total GDP was 6.5%, similar to professional, scientific, and technical services and wholesale trade industries.
From 2006 to 2016, real value added for the digital economy grew at an average annual rate of 5.6 percent, outpacing the average annual rate of growth for the overall economy of 1.5 percent
12/31/2018

19. OECD’s Next steps

20. Way forward
Further research into potential sources of mismeasurement: active involvement in G-20 work, jointly with IMF
Work plan of OECD Advisory group:
Agreement on the typology of digital economy and the framework for measurement
Consistent with typology for digital trade; joint work with TFITS and input into the 2018 G20 Trade and Investment Working Group
Research into potential data sources, and gaining practical experience
Meeting of the Advisory Group on 9 November 2018
Indicators to better highlight the digital economy
Work feeds into the Measurement Roadmap for the OECD’s Going Digital project

21. Thank you for your attention!