Information and Communication Technology and the Measurement of Real Output, Final Demand and Productivity

Over the past decades, the majority of information and communication technology (ICT) products have undergone rapid technical change. To the extent that such technical progress benefits consumers and users, quality improvements should be reflected in official price and quantity indices. When this is not the case, there is a tendency to overestimate price movements and underestimate volume changes of ICT products. All statistical offices deal with this issue, but the degree and nature of quality adjustment of price indices of ICT products varies considerably across OECD countries. The present work does not venture to determine “best practice” for quality adjustment in statistical offices. However, it simulates measurement effects on key economic variables (real output, private final consumption, government expenditure, investment, exports and imports), and productivity, under the assumption that the price indices of ICT products are fully quality-adjusted. The paper draws on ...