Economic welfare in the digital economy

This project explored new ways of measuring economic welfare in the digital economy, responding to growing concerns that GDP no longer reflects well-being in a changing society. While GDP remains the standard measure of economic performance, it does not capture many aspects of welfare, particularly those linked to digital innovation, social well-being and sustainability.

To address this, we carried out three large, representative surveys of the UK population. Using stated preference and contingent valuation methods, we estimated the value that people place on a range of digital and non-digital goods, with results analysed by socio-demographic groups, geography, and changes over time.

Beyond direct valuation, the project examined the idea of a ‘consumption technology’- the way in which digital innovation enhances consumer utility by delivering more value for the same spending. This perspective highlights how GDP understates improvements in consumer welfare. We also developed a conceptual framework for linking time, production, consumption and productivity, recognising time as a crucial element in how welfare is generated.

Together, these approaches contribute to the wider debate on creating welfare measures that go beyond GDP.

We ran three surveys between February 2020 and February 2021 to explore approaches to measuring economic welfare in the digital economy. Previous research (primarily in the US) used massive online experiments, but could not guarantee representativeness as the sampling method was not random. We complement these findings by conducting large representative surveys of the UK with YouGov, such that the data can be broken down by socio-demographic characteristics and geography. 

The survey uses a stated preference method in an online choice experiment. This involves asking participants to report their willingness to accept compensation for the loss of digital goods such as social media. We also asked about non-digital free goods (such as public parks). 

We first ran the survey in February 2020, with 10,000 responses. In the wake of the COVID-19 pandemic, we re-ran the survey during the lockdown period, in May 2020, with 1,500 respondents. We ran thelarger survey again in February 2021 to compare changes over time. 

We also considered conceptual issues relating to digital and welfare, namely the time taken to produce and consume. We developed a framework to think about the impact of digital on different types of economic activities. 

Through the repeated surveys we developed a better understanding of the usage and valuation of a range of digital and non-digital goods, before and during the pandemic. Average valuations of free digital goods were strongly correlated to usage (i.e. the greater the share of people that use a free digital good, the more they value it on average). The highest valued products were online search and email, with mean annual values of over £3,000 for each. 

Valuations changed markedly between the surveys in February and May 2020, with May being during the national lockdown in response to the coronavirus pandemic. Average valuations of online learning, gaming and shopping saw large increases in this short period of time, consistent with their increased usage. Valuations for Google maps, and physical substitutes (such as cinemas and newspapers) fell. 

We also found considerable variation across the population. Londoners valued public parks much higher than the rest of the country, and younger people valued online news much higher than older people. 

The work complements previous work (largely in the US) by ensuring representativeness in the sampling, enabling breakdowns of the valuations by socio-demography characteristics and geography. This offers a cross-check on results from surveys that are not representative and improves understanding of this important method for future researchers. 

Policymakers and analysts in the UK and internationally have made use of the results in better understanding the digital economy, including the relative importance of different aspects in the UK context. We have presented this work at a range of conferences and continue to share our experiences with researchers around the world. 

External publications:

Coyle, D. and Nguyen, D. (2023) “Free Digital Products and Aggregate Economic Measurement,” Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 539, pages 27-50.  

Coyle, D. and Nakamura, L. (2022) “Time Use, Productivity, and Household-centric Measurement of Welfare in the Digital Economy” International Productivity Monitor, Number 42 

Coyle, D., Nguyen, D. “Valuing goods online and offline: the impact of Covid-19“. Economics Vetted and Real-Time Papers Issue 33, CEPR Press, 30 June 2020? 

Working papers, reports: 

Coyle, D., Nguyen, D. ‘Free goods and economic welfare’ ESCoE DP 2020-18, Dec 2020 

Coyle, D., Nguyen, D. “Valuing goods online and offline: the impact of Covid-19” ESCoE DP 2020-10, July 2020  

Presentations: 

Coyle, D., and Diepeveen, S. ‘Creating and Governing Value from Data’ ASSA 2022 Virtual Annual Meeting, 7-9th Jan 2022 

Coyle, D. Panelist How Better Statistics Lead to Better Policy in a Changing World, Progressive Policy Institute, 3rd Dec 2021 

Coyle, D., and Nakamura, L. ‘Time use and household-centric measurement of welfare in the digital economy’ Session 3: New Approaches and Metrics in Measuring Productivity and Well-being Linkages, Workshop on Productivity and Well-being: Measurement and Linkages, Centre for the Study of Living Standards and The Productivity Institute, 16-17th Nov 2021 

Coyle, D. ‘What don’t we know about measuring the Digital Economy’ Keynote presentation, All in Good Measure: Exploring New and Better Ways to Measure the Digital Economy, Stanford Digital Economy Lab Annual Workshop 8th Nov 2021 

Nakamura, L. and Coyle, D. ‘Time Use and Household-Centric Measurement of Welfare in the Digital Economy’ Session 3: Time Use, Welfare and GDP I, 36th Annual Virtual General Conference, IARIW, 23-27th Aug 2021 

Coyle, D. ‘Free goods and economic welfare’ Toulouse School of Economics Digital Economy Seminar Series, Jun 2021 

Coyle, D. ‘The Data Economy: more questions than answers’ Federal Reserve Banks of Atlanta, Dallas and Richmond, Technology-Enabled Disruption: Implications for Business, Labor Markets and Monetary Policy, 21 May 2021 

Coyle, D. ‘ Why digital is so disruptive’ RES Annual Public Lecture 2021, 6 May 2021 

Nguyen, D. ‘Digital Output and Productivity’ internal workshop The Productivity Institute, 1st Feb 2021 

Nguyen, D. and Coyle, D. ‘Free goods and economic welfare’ PARALLEL SESSION 2: Media and Social Media Toulouse School of Economics 14th Digital Economics Conference, 7-8th January 2021 (online)  

Nguyen, D. ‘Free goods and economic welfare’ NIESR Brownbag seminar (internal), 10th Dec 2020 

Coyle, D. and Nguyen, D. ‘Free goods and economic welfare’ ESCoE Covid-19 Webinar, 26th Nov 2020 

Nguyen, D. ‘Free goods and economic welfare’ OECD Joint Meeting of the Working Party on Financial Statistics and the Working Party on National Accounts, Item 5. Digitalisation, 5th Nov 2020 http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=COM/SDD/DAF/A(2020)2/REV1&docLanguage=En 

Coyle, D. and Nguyen, D. ‘‘Free’ Digital Goods and Economic Welfare’ ESCoE Conference on Economic Measurement 2020, Contributed Session D: Welfare, 16-18th Sep 2020 

Nguyen, D. ‘Measuring data and the digital economy’ Dept for Digital, Culture Media and Sport, 26th Feb 2020 

Nguyen, D. ‘Why is measuring the digital economy so difficult when everything is stored as data?’ ESCoE Seminar Series, 14th Jan 2020 

Nguyen, D., and Paczos, M. ‘Measuring the economic value of data and cross-border data flows’ AEA/ASSA conference, San Diego, 3rd January 2020  

Coyle, D. ‘Statistics in the digital age’ at Statistics Flanders and CBS, Statistics Netherlands Conference “Data science for better decisions”, 17th Dec 2019 

Nguyen, D. discussant on a Bruegel panel on “How should we measure the digital economy” on the 11th Dec 2019, Brussels.  

Posters: 

Coyle, D., Nakamura. L. and Nguyen, D. ‘Economic Welfare in the Digital Economy’ ESCoE ‘Addressing the challenges of measuring the modern economy’ report launch. NIESR, 12th Feb 2020. 

Coyle, D., Nakamura. L. and Nguyen, D. ‘Economic Welfare in the Digital Economy’ ESCoE and ONS Engagement Event: Meet the Researcher, ONS Newport, 15th November 2019

Blogs: 

Manley, A. ‘The value of public parks’ 21 Sep 2021, Bennett Institute for Public Policy, University of Cambridge  

Coyle, D. and Nguyen, D. ‘The value of free digital goods’ 15 Dec 2020. ESCoE website 

Nguyen, D. ‘How the increasing trend to rent factories is challenging economic measurement’ 13 Sep 2019. ESCoE website 

Nguyen, D. ‘New general-purpose tech on the block: cloud computing services transform our economies while economic measurement struggles to keep up’ 22 Aug 2019. ESCoE website 

Podcast: 

Coyle, D. and Nguyen, D. ‘Valuing digital services’ interviewed by Tim Phillips, 24 Jul 2020 https://voxeu.org/vox-talks/valuing-digital-services