Digitalization changes the world – are new statistics needed to support economic policy?

Kotiranta AnnuKoski HeliPajarinen MikaRouvinen PetriYlhäinen Ilkka

With artificial intelligence, cloud computing, and other recent digitalization phenomena, we are about to enter the second
era of digitalization, which poses a challenge for the conduct of economic policy and for measurement that supports it.

Per se, the accounting principles employed in estimating Gross Domestic Product (GDP) remain valid also in the new era.
Nevertheless, the impacts of digitalization are not fully captured in the current employed measurement practices. In recent
times, year-to-year real changes in GDP have been underestimated in official statistics.

When it comes to GDP and material well-being, measurement challenges are to be found in five domains:
1. determining prices as well as quality, variety, and volume of digital goods and services;
2. gauging the consequences of reduced roles of specialized middlemen due to, e.g., online self-service;
3. capturing the effects of increasingly prevalent free and ad-supported internet services,
4. estimating the effects of multinational enterprises’ efforts in minimizing their tax burden in particular regarding intangible
assets, and
5. accounting for the rising platform, sharing, or gig economy, in which consumers may simultaneously be producers.

Domains 2 to 5 above tend to erode the tax base. Domains 1 to 3 may lead to a situation, in which indexed social benefits
over-compensate for the actual loss of welfare and thus rise “too fast”.

The ongoing work to take into account the consequences of digitalization in national accounts should be continued. The
increasing societal importance of digitalization also call for a separate satellite account for gauging, e.g., the welfare effects
of digital goods and services provided free of charge. Besides GDP, other measures of welfare and well-being are needed.

Prime Minister’s Office 2/2017.

Publication info

Date
28.04.2017
Keywords
Digitalization, gross domestic product, gdp, mismeasurement
Pages
32
Availability of print version
Available
Language
Finnish
Publication on other services
vnk.fi