Measuring the digital economy: Why is it important?

Digitalisation – the use of digital technologies and data – has radically altered our economies. Whether it’s the way people consume goods and services, the tools and inputs that producers use in production, or the ability for producers to interact with consumers, digitalisation is fundamental to the modern economy. But policy makers have expressed concerns that the digital transformation remains largely hidden in the national accounts and macroeconomic indicators such as Gross Domestic Product (GDP).

To address these issues, the Organisation for Economic Co-operation and Development (OECD)’s Informal Advisory Group on Measuring GDP in a Digitalised Economy has produced the OECD Handbook on Compiling Digital Supply and Use Tables (SUTs). The handbook, released this month, is consistent with the System of National Accounts, which is the international statistical standard for producing national accounts, as well as with the second edition of the Handbook on Measuring Digital Trade released in July by the International Monetary Fund (IMF), the OECD, the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO).

The OECD has been active in this field for many years. The OECD Handbook on Compiling Digital Supply and Use Tables builds on earlier work such as OECD Digital Economy papers (see references) detailing the impact of digitalisation on the economy as well as broader society; and the Going Digital Toolkit, which provides tools for countries to assess their state of digital development through a range of indicators covering seven policy dimensions.

The new handbook proposes a measurement framework for compiling Digital SUTs to provide information on the output and value added of digital industries, amounts of digital goods and services purchased, and the extent to which digital ordering and delivery is taking place. In a series of three blog articles, we will introduce this measurement framework. This article looks at the motivation for its development, while the second article will provide an overview of the framework. The third article will feature some early results from countries and illustrate their policy relevance.

Digitalisation has created new products and services while also changing the way that existing products are ordered and delivered. For instance, as shown in Figure 1, having a web presence has become standard for businesses across OECD countries.

The digital transformation has also created new services, such as cloud computing services (CSS), that have brought about a fundamental shift in how businesses purchase and use software and hardware. Figure 2 shows the rapid increase in the percentage of businesses purchasing CCS between 2014 and 2021 in OECD countries, with some countries such as Finland, Australia, Sweden, and Japan reaching around 70 per cent. The measurement of CCS is particularly challenging as suppliers may be located abroad.

New digital industries are flourishing. For example, Digital Intermediation Platforms act as intermediaries in a wide range of sectors such as transport, finance, and accommodation. Some of these platforms – such as Uber and Airbnb – charge a fee for each transaction, while others apply a business model in which services are provided for free, cross-subsidised through advertising revenue. These business models are not new to the national accounts, but the extent of their impact is considerable.

The output produced by the new digital industries is, in principle, included in existing macroeconomic indicators from the national accounts such as GDP because production is measured regardless of how products are sold. However, there is concern that the digital transformation remains largely hidden in the accounts because it is part of aggregates (or totals) and the digital element cannot be identified. The Digital SUTs measurement framework in the OECD Handbook on Compiling Digital Supply and Use Tables was developed to improve the visibility of digitalisation.

The international Advisory Expert Group on National Accounts – the group which advises on changes to the international accounting standards – has endorsed the inclusion of Digital SUTs in the broad national accounts framework of the 2025 System of National Accounts; and it has welcomed the publication of the new OECD handbook providing guidance on how to produce the tables.

The Digital SUTs framework does not propose a single definition of the digital economy and a single indicator such as the size of the digital economy as a percentage of GDP. Rather, it proposes a measurement framework. To see why, let’s imagine a country which manufactures more computers and cell phones than any other country but only 5% of the population has internet access, and another country which manufactures zero computers and cell phones but 100% of the population has internet access. It would be hard to say which one has a bigger digital economy. Therefore, the OECD Digital SUTs handbook sees the digital economy as a multidimensional phenomenon that is best described using several different accounts and indicators that are part of a coherent framework. The shape of this measurement framework and the indicators that it produces will be explored in the second article.

• IMF et al. (2023), Handbook on Measuring Digital Trade, Second Edition, OECD Publishing, Paris/IMF, Washington D.C./UNCTAD, Geneva 10/WTO, Geneva
• OECD (2023), OECD Handbook on Compiling Digital Supply and Use Tables, OECD Publishing, Paris
• OECD (2021), “Harnessing the productivity benefits of online platforms: Background paper”, OECD Publishing, Paris
• OECD (2019), Measuring the Digital Transformation: A Roadmap for the Future, OECD publishing, Paris
• OECD (2019b), “ICT investments in OECD countries and partner economies: Trends, policies and evaluation”, OECD Digital Economy Papers, No. 280, OECD Publishing, Paris
• OECD (2018), “A taxonomy of digital intensive sectors”
• Ker, D. (2021), “Measuring cloud services use by businesses”, OECD Digital Economy Papers, No. 304, OECD Publishing, Paris

1.  We would like to acknowledge our former colleague John Mitchell, lead author of the OECD Handbook on Compiling Digital Supply and Use Tables, for developing a draft paper and other materials that formed the basis for this series of blogs.