The Digital Economy and Productivity

Abstract

After reviewing the state of digitalization---the use of digital information technology (IT) throughout the economy---we consider the slippery concept of a distinct digital economy and efforts to record it in national accounts. We then anchor the digital economy in a growth accounting framework, augmenting the conventional measure of the IT contribution to productivity---innovation in the production of IT capital plus labor-saving use of IT throughout the economy---with the contribution from the digital platforms that help users navigate the sprawling information landscape. We discuss the difficult measurement issues that thwart a full accounting of the scope and productivity of the digital economy remain. These include quantifying the intangible assets created by platforms and their users, measuring the consumption of intangible services provided by platforms---often provided for free---and identifying platforms within the existing statistical system, which does not treat their activity as a distinct industry.