4 Difficulties in GDP measurement in the age of information

The innovations and technological change seen in recent years serve as a foundation for the development of the global economy. Taken together, the rapid, continuous progress in information technology, the digitalisation of information and increased connectivity have fundamentally altered people’s lives, both at work and in their free time. Robotisation, the increasing complexity of production processes and the advance of artificial intelligence are all developments which are changing and have changed the operation of companies and are transforming production chains. As a result of this, the number of robots used in industrial production has increased significantly and according to the projections, the current trend may continue to intensify in the future. Despite these developments, productivity growth – i.e. real output per working hour – has declined substantially in the past decade, but in particular after the 2007‒2008 crisis, and has remained very subdued since then, especially in the developed countries. In the case of the United States, the annual growth rate of productivity was around 3 percent between 1996 and 2003, mostly due to the significant development of the information and communication (ICT) sector. Despite the obvious continuation of the digital revolution, by the period 2004‒2010 the growth rate declined to 2 percent, and at present (2010‒2016) it is merely 0.5 percent. Thus, although digitalisation affects a wide range of the economies, it is not reflected in the productivity statistics. This phenomenon is also referred to as Solow paradox (Triplett, 1998). At present, there are essentially four explanations for the deceleration in productivity. Insufficient demand, deceleration triggered by supply factors, slower spread of innovations and their becoming commonplace, and GDP measurement problems. In this section, we attempt to analyse this latter problem and find an answer for the degree of GDP measurement problems. At the same time, we try to find a solution for the question whether the methodological difficulties alone are able to explain the deceleration in productivity, which has been observed globally. The methodology used for the measurement of economic activity has been disputed by economists and statisticians for ages, particularly in the light of the dynamic digitalisation currently taking place and structural changes in the economy. Recently, an increasing number of papers have been published in relation to this topic and as a response to the deceleration in productivity, in which the authors discuss the potential reasons. Based on a review of the broad literature, the key explanations are as follows: erroneous measurement of qualitative changes, incorrect treatment of the increased role of services, ignoring free contents in the statistics, underestimating the role of the “sharing economy”. In this analysis, we examined whether the measurement problems alone are able to explain the deceleration in productivity, which has also observed in the Hungarian data. Based on our calculations, it can be clearly concluded that although these problems may contribute to the existing phenomenon to a small degree, in their own right they are insufficient to explain the problem. Based on our estimations, the consumption of free digital contents – which is essentially left out from the quantification of GDP – may have distorted the level of domestic output by a maximum of 2‒3 percent in 2012 compared to 2004. The same values for the USA are substantially higher, according to the available estimations. The distortions affecting the ICT sector, which exist mostly in terms of prices, may raise the GDP level by 0.5–1.5 percent.

The colleagues of HCSO assisted in the completion and finalization of this chapter. We incorporated their useful comments into our analysis, for which we are thankful.