Tracking the Economic Value of Embedded Digital Technology: A Supply-side Methodology

This methodological report indicates a way forward in estimating the economic role of embedded digital technology (EDT) from the supply side. We propose a more holistic approach to the production and diffusion of ICT and we develop the foundation of a methodology that would ultimately take into account the overall use and impact of embedded digital technology in the productive process. Technological, economic and statistical arguments support our approach. Current technological development no longer accommodates clear borderlines between ICT and non-ICT goods or between general purpose computers and embedded digital devices. The economics and statistics of ICT reveal the complex and multi-channel contributions of ICT to the productive process. The methodology we propose uses the input-output method known as backward linkages to give a measure of EDT as ICT consumption generated along the value chain by the demand of final goods. We give an account of the methodological limitations of applying the method and an overview of data availability and shortages for its implementation. A simplified application of the methodology to German data is used as an example.