The Digital Economy Accounts for 8 Percent of US GDP, but 86 Percent of Labor Productivity Growth

Luke Dascoli October 4, 2021
October 4, 2021

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Source: van Ark et al., “Productivity and Innovation Competencies in the Midst of the Digital Transformation Age: An EU-US Comparison,” European Commission, October 2019.

Commentary: The adoption of information and communication technologies (ICT) by businesses and workers goes far beyond tech industries. Work associated with the digital economy may only concern a narrow industry, but the economywide accession of that industry’s innovations is far more valuable than just its output, because they spur the process of digitalization in all other sectors, making them more efficient in their production processes and services.

Attempting to better understand the relationship between productivity and digital innovations, a 2019 study by the European Commission illustrates how a country’s innovation competency affects productivity. The research examines the United States and EU member-nations using data from previous OECD literature to model each nation’s productivity contributions from digital production and the most and least digitally intensive industries. The European Commission finds that, in the United States, digital-producing industries accounted for nearly 0.5 percentage points of the 0.6 percent growth in national labor productivity between 2013 to 2017. Digital-producing industries in the United States only accounted for about 8.2 percent of GDP in 2017, but their contribution equates to about 86 percent of the labor productivity growth in that period. And while several European countries instead faced steep declines in their digital economies’ contributions to productivity, U.S. leadership in the study reflects a strong willingness among the nation’s labor force to circulate and utilize new innovations economywide.