Information & Communication Technology and True Real GDP: Economic Analysis and Findings for Selected Countries

The expansion of information & communication technology (ICT) is continuing in OECD countries and the world economy – partly due to the ongoing fall of relative ICT prices. The continuing absolute fall of ICT prices and ICT capital prices, respectively, is not adequately considered in the standard analysis of ICT. In the study presented here the ICT investment-GDP ratio is calculated in real terms and it is shown that this ratio is higher (order of magnitude is about 2 percentage points) than the nominal investment-GDP ratio which is misleading the ICT sector, policy makers and society at large. Moreover, we take an innovative look at the digital time budget of private households in selected OECD countries. Assuming that 10% represents the relevant share of the time budget the digital value-added of private households stands for an unrecorded digital value-added of 2-5% of gross domestic product; with a share of 20% of the household’s internet time budget devoted to value-added the hidden internet value-added in the US would be in the range of 4.7% to 10.4%. Hence the overall understimation of the ICT sector’s contribution to GDP is considerable and therefore changes in official statistical analysis and the System of National Accounts are required.