Fact of the Week: Digital Goods Have Increased Total Consumer Welfare Across 13 Nations by Over $2.5 Trillion
Source: Erik Brynjolfsson et al., “The Digital Welfare of Nations: New Measures of Welfare Gains and Inequality,” NBER Working Paper Series, no. w31670 (September 2023).
Commentary: A September 2023 working paper by Erik Brynjolfsson et al. found significant increases in consumer welfare from digital goods. Covering over 39,000 Facebook users across 13 countries, the study analyzed the total gains in consumer welfare for 10 major digital goods. Specifically, those goods were Facebook, Twitter, Instagram, WhatsApp, Snapchat, TikTok, Google Search, Google Maps, YouTube, and Amazon Shopping. The countries involved in the study were the United States, Canada, Mexico, Germany, United Kingdom, Ireland, France, Belgium, Norway, Spain, Romania, Japan, and South Korea. The authors estimated the value of digital goods by surveying the Facebook users about how much money they would be willing to accept in exchange for not having access to Facebook and the other selected goods for one month.
The study found that total consumer welfare from the selected goods increased by $2.5 trillion. When looking at how welfare gains vary across countries, the researchers found that poorer countries experienced greater welfare gains as a share of per-capita GDP. In particular, a $10,000 increase in per-capita GDP was associated with a 2.09 percentage point decrease in the value of the selected digital goods as a share of per-capita GDP. In other words, welfare gains from digital goods constitute a greater share of national income in poorer countries. This suggests that access to digital goods decreases consumer welfare inequalities between richer and poorer nations. Similarly, when looking within individual countries, the authors found that consumer welfare gains were greater among individuals with lower incomes than those with higher incomes.
