Do‐It‐Yourself Digital: The Production Boundary, the Productivity Puzzle and Economic Welfare

25 Pages Posted: 8 May 2020

See all articles by Diane Coyle

Diane Coyle

Bennett Institute for Public Policy

Date Written: October 2019

Abstract

Part of the debate about the ‘productivity puzzle’ concerns potential mismeasurement of GDP due to digital activities. This paper discusses some measurement issues arising from digitally‐enabled substitutions in activity across the conventional production boundary. Production boundary issues are not new, as conventionally defined GDP statistics account for the monetary cost but not the time cost of consumption and production. This means that changes in the way in which time is allocated between market and home production affect measured growth and productivity, as well as economic welfare. Just as technological innovation in domestic appliances led to a substitution from home production into market consumption in the second half of the 20th century, today's digital innovations are driving some reverse substitution out of the market into home production. Statistical agencies do not currently collect the data needed to measure the scale of the switch, but the available evidence suggests that it may be enough to make a contribution to understanding the current productivity puzzle.

Suggested Citation

Coyle, Diane, Do‐It‐Yourself Digital: The Production Boundary, the Productivity Puzzle and Economic Welfare (October 2019). Economica, Vol. 86, Issue 344, pp. 750-774, 2019, Available at SSRN: https://ssrn.com/abstract=3595573 or http://dx.doi.org/10.1111/ecca.12289

Diane Coyle (Contact Author)

Bennett Institute for Public Policy ( email )

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