Accounting for Innovations in Consumer Digital Services: It Still Matters

46 Pages Posted: 17 Jul 2019

See all articles by David M. Byrne

David M. Byrne

Board of Governors of the Federal Reserve System

Carol A. Corrado

The Conference Board; Georgetown University - Center for Business and Public Policy

Date Written: 2019-06-27

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; this service flow 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. Our new estimates imply that accounting for innovations in consumer content delivery matters: The innovations boost consumer surplus by nearly $1,800 (2017 dollars) per connected user per year for the full period of this study (1987 to 2017) and contribute more than 1/2 percentage point 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 nearly .3 percentage points per year.

Keywords: Consumer Digital Services, Consumer Durables, Consumer Surplus, Digital Transformation, Information And Communication Technology, Ict, Price Measurement, Productivity

JEL Classification: L86, L16, D13, O33, O47

Suggested Citation

Byrne, David M. and Corrado, Carol A., Accounting for Innovations in Consumer Digital Services: It Still Matters (2019-06-27). FEDS Working Paper No. 2019-049. Available at SSRN: https://ssrn.com/abstract=3417745 or http://dx.doi.org/10.17016/FEDS.2019.049

David M. Byrne (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
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Carol A. Corrado

The Conference Board ( email )

845 Third Avenue
New York, NY 10022
United States
202-340-0252 (Phone)

Georgetown University - Center for Business and Public Policy ( email )

Washington, DC 20057
United States

HOME PAGE: http://cbpp.georgetown.edu

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