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OECD's Work on Measuring the New Economy | Frontier Dialogue

Organisation for Economic Co-operation and Development's Deputy Director of Directorate for Science, Technology, and Innovation, Dirk Pilat, gives insight into OECD’s work on innovation, business and productivity dynamics, science, and technology, digital economy policy, consumer policy as well as the statistical work associated with each of these areas.

This Dialogue intends to provide a forum for prominent scholars, policymakers and industry experts to exchange views and collaborate on possible new and better measurement approaches.

Luohan Academy has been in close collaboration with some of the world's foremost social scientists, policy experts, and business practitioners to document and analyze society's and the economy's ongoing digital transformation worldwide. Our very first Frontier Dialogue focuses on the measurement of the new economy, a crucial step in the direction of better understanding the impact of digital transformation.


Dirk Pilat: So, I'll talk a little bit about some of the work which we're doing at OECD on measuring the new economy and also probably touch on a number of the other speakers and what they've been talking about. I don't think we need to say too much about why this all matters. I think there's a lot of policy issues in this area, including the impacts we see on economy and society. And I agree with the previous speaker that basically, I think the impacts on society are really important as well. And if we want to understand this and I think we need to do a lot more work on measurement, and there are quite a lot of challenges. I just did a little, um, we've been through this in the eighties. Now we have probably a similar situation.

We see a lot of new technologies. You don't see very clearly productivity, and I know other speakers will talk about that as well. I think it is difficult partly because we see a lot of very rapid change in this area, which means that measurement often backs, it is hard to keep up sometimes with some things. And also I think there is an issue that the implementation of some of these issues can be quite costly and difficult. There is a lot happening and I didn't want to start from the macro perspective. I'll come back to that a little bit later. I do think it's important to say as well, we need a micro underpinning. We need to understand what's happening from little. We need to understand what's happening at the level of households and there is a lot happening there.

So I think for instance, this is from some of the work we've been doing for a number of OECD countries and where you can see that the number of firms, large firms, small firms that are using big data analysis a few years ago. And I think what we typically find there is that some of these technologies haven't spread quite as widely as we sometimes think they have. So there's still a big gap in future on these technologies in many cases. And that's something we also see if we think about a productivity story and we bring it back to a micro level, that there are very big differences between firms in the productivity dimension. So we don't see all of activity at the aggregate level. We don't see that sort of digital technology being reflected at the aggregate level. Then clearly we do see, I think at the micro level that some firms are turning these technology into productivity growth, but the number of firms that are doing that is not really large enough yet to turn that into an accurate story. So I think there are differences here and we see very clear divergence in productivity between some of the superstar firms and many others in terms of what's happening in the economy.

I think the other thing is, I think we also need look at the household level and I think if we understand, want to understand impacts from at the level of the people and individuals and society, this is from the report which you just mentioned, which we did for the G20 this year. Just looking at how some tools are being used in different countries, I think, gives us some insights on where we are in different countries and infusion of this knowledge of what's happening.

So there is a lot of indicators on infrastructure, on innovation, on society, on jobs and growth. There's a lot happening. We have a lot of these indicators ourselves available for many countries on our "go digital toolkit". So there's a lot of information, and the first speaker, Michael Spence already mentioned that as well. I mean, I think there is a lot available that we can draw. However, there are a couple of main challenges, I think, and I wanted to just touch on a few of them also coming in from more of a policy perspective. I think first that the digital economy is still not very visible in economic statistics. So we still have difficulties in sort of understanding what this is really about. What do we really mean by it? And I want to say a few words in a second about some of the work which we did on definitions this year.

And also I think what is going on in many countries on better developing supply use tables really sort of capture the digital economy better. There are also, I think some impacts that are very hard to measure, on productivity, of course, on jobs and well-being. I think everybody knows and I'll of course talk about zero pricing on certain digital services, which is an issue. So there are some impacts which are very hard to get in. I think also on the labor market side, it's still tough. There is a lot of discussion about what this is really doing to the labor markets. We know that some jobs are going to be lost and new jobs are being created. A lot of these will mean that we need to see a shift in the labor market from those jobs that are declining to jobs that are growing.

And the big issue there is typically skills. How do we make sure that people get the new skills for a new job that are being required. Then there, again, there is a measurement issue that we're looking at. Fourth issue, I want to mention here because I think it's very crucial as well on something we did some work on this year on data and data flows. Data, I think is a really important asset in this digital economy. A lot of policy discussions are going on about data, sharing of data, access to data, data flow. So this is again an area where measurement is still a problem. Fifth issue is really about the diffusion of these technologies. If we do think we want to see impacts at the firm level, and then ultimately at the industry level and on the economy-wide level, a lot of this has to do as well with how these technologies are diffusing across economy and how new technologies are being picked up in firms of these use.

So I think there are, again, still gaps in terms of what is being done. And the final issue here is I think, and Michael Spence touch on this as well, is the issue trust, things like digital security, privacy obviously is not that much that we have on that. The difficulties I think we have is still, and I mentioned that already, the skill systems, so the national statistical offices in many countries have difficulties responding quickly to the rapid changes that we're seeing in this new economy. Also I think the other issue is that some in many countries we do have good case studies. We have good data, we have good methodologies that exist that have been tested in many countries, but diffusion of these methodologies and ways of doing things across countries is still quite patchy. So we have, you know, we have statistics that are being developed in China, in the United States, in Europe, but they're not necessarily comparable. Like you're doing things in a slightly different way, which means also then it's hard to look across countries.

So those are a couple of, I think, issues that are there that we need to work on. They also, I think, affect how we look at the macro story. One of the things we did this year was, in our work for G20, was doing a little bit of work on defining the digital economy. Now this has been going on for a very long time. We were working on measuring the ICT sector already in the nineties. There have been variations for quite a long time. Mostly I think we know it's a bit fuzzy. There are some boundaries that are not very clear. I think we have two approaches typically.

We have a bottom-up approach where we basically look at different sectors. People can look at certain products. We try to build it up from there to build a good story into some sort of definition of digital economy. And we have top-down definitions where we basically talk about the platform economy or other types of things where we basically come down from that perspective. Those are more difficult. They are more objective. They're also more difficult to get agreement on internationally. What we try to do is come up with a definition that was agreed to by G20 countries in July. We did a lot of work as well with international organizations. I saw Marshall Reinsdorf from the IMF was on the call. I think he was one of the people involved in this discussion. So we agreed on a definition. I'll come back to it in a second.

And the idea is really that we have a definition that has different tiers. It has different levels of different elements that are complimentary and that can help us build a perspective on the digital economy. They're all based on existing concepts, on existing things that exist already in, also, in developed and international organizations. And we also included a final tier, which was really on the digital society, very closely to what I think Nelson will talk about in a second. So what we have there is this more perspective of four different elements. So one is the core, which is very much the ICT producing sector. This has been around for a long time. We have a narrow digital economy where you basically have producers as well that are very much reliant on digital technologies and on data. So think here, for instance, about some of the platforms that are operating. If you basically wouldn't be using digital technology, you wouldn't have a business model.

So we have Netflix there, we have Uber, lots of these. Also I think Chinese platforms would be there. They are not necessarily producers of ICT technologies, but they're completely reliant on digital technologies for their business models. And then we have a broader definition where we would basically be going into firms that rely heavily on that are in hardware and yet economic activity is enhanced by technologies and data. And that's, of course, where you get more difficulties in the boundaries. And finally you have a part which is digital society, where you also go into other activities, not necessarily economics, and that also being enhanced by digital technology, where you get into the societal aspect of things.

So I think this is one way of trying to think about this. We are doing a lot of work at the international level or macroeconomic statistics, trying to respond to the issues here. There's an advisory group of measuring GDP in the digital economy at the OECD. Working with different international organizations, we developed a framework for digital supply use tables. Last year we're doing a lot of work on digital trade. So there is a lot of activity to try and move forward on these issues and to try and reach agreement. And there's also a lot of work with other international organizations that are trying to move this agenda forward because we need to move together on these issues to try and make sure we move ahead. And there are challenges here. This is just one example on price measurements, where we see, even though, you know, if you talk about ICT products, you think about supply prices going down. You see in here that there are very big differences in a sector where, for instance, Australia and France have been declining prices for ICT equipment over the periods of 2020, 2010, 2015, whereas the UK, they were going up.

So is this a reality or is this basically methodologies that are different and affected by how we look at it? So I don't want to take you any further. We have a lot of information which I can share with you. That is why I put these sort of more advertising slides in it. So you can basically find some of the material. There's a lot going on, a lot more that we need to do, but I think also progress that is slowly being made to try and sort of move the boundaries forward. And finally, I wanted to mention this toolkit again, also because it's fun, you can basically compare your own country in a very dynamic way and have a look at that. So let me end there and looking forward to discussion session. Thanks.


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