Defining and Measuring the Digital Economy

This paper, made possible by support from the Commerce Department’s National Telecommunications and Information Administration (NTIA), describes the work of the Bureau of Economic Analysis (BEA) to develop estimates towards the construction of a new digital economy satellite account. These estimates are the first step to a comprehensive measure of the contribution of the digital economy to gross domestic product (GDP). BEA’s GDP statistics include economic activity associated with the digital economy, but they do not allow data users to separately identify the contribution of the digital economy to economic growth. These new estimates complement the official statistics by providing a targeted picture of the role of the digital economy in the overall U.S. economy.

BEA constructed the estimates presented in this paper within a supply‐use framework following a three‐ step process.  First, BEA developed a conceptual definition of the digital economy. Second, BEA identified specific goods and services categories within BEA’s supply‐use framework relevant to measuring the digital economy.  Third, BEA used the supply‐use framework to identify the industries responsible for producing these goods and services, and estimated output, value added, employment, compensation, and other variables for these industries.

This report presents BEA’s initial work to lay the foundation for a digital economy satellite account. Conceptually, a digital economy satellite account should include all goods and services related to the digital economy. However, the preliminary estimates presented here are based on goods and services that are primarily digital. There are numerous challenges to estimating the economic contribution of “partially‐digital” goods and services which are laid out in this report. These challenges are opportunities for future research to expand these early estimates into a complete digital economy satellite account.

From 2006 to 2016, BEA estimates that digital economy real value added 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. In 2016, the digital economy was a notable contributor to the overall economy—it accounted for 6.5 percent of current‐dollar GDP, 6.2 percent of current‐dollar gross output, 3.9 percent of employment, and 6.7 percent of employee compensation.