Digital Economy
The digital economy refers to economic activity that is enabled, mediated, or produced through digital technologies, including the internet, mobile networks, cloud computing, and data. It encompasses everything from e-commerce and digital platforms to digitally delivered services and the use of data in production.[1]
Definition
The digital economy is the portion of economic activity that relies on digital technologies and digital inputs. It is difficult to measure precisely because digital technologies are increasingly embedded in all sectors, rather than confined to a distinct set of industries. Some analysts distinguish within it the core digital sector (IT and telecommunications), the narrow digital economy (digitally intensive industries), and the broad digital economy (all activity enabled by digital technology).[1]
Key features
| Feature | Description |
|---|---|
| Data as an input | Data have become a key factor of production. |
| Platform business models | Digital platforms match users and generate network effects. |
| Near-zero marginal cost | Digital goods can often be reproduced at negligible cost. |
| Network effects | Value increases as more users join a network. |
| Global reach | Digital services can be delivered across borders. |
Economic implications
The digital economy has significant implications for productivity, employment, and competition. It can raise total factor productivity by improving efficiency and enabling innovation, but it also raises new policy challenges, including the taxation of digital firms, data privacy, market concentration, and the future of work. It is closely related to the platform economy and the real economy.[1]