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  5. GDP-B: Accounting for the Value of New and Free Goods

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

GDP-B: Accounting for the Value of New and Free Goods

  • Erik Brynjolfsson
  • Avinash Collis
  • W. Erwin Diewert
  • Felix Eggers
  • Kevin J. Fox
American Economic Journal: Macroeconomics (Forthcoming)

Abstract

The welfare contributions of new goods and free goods are not well-measured in our current national accounts. We derive explicit terms for the contributions of these goods and introduce a new framework and metric, GDP-B which quantifies their benefits. We apply this framework to several empirical examples including Facebook and smartphone cameras and estimate their valuations through incentive-compatible choice experiments. We find that including the gains from Facebook adds 0.05 to 0.11 percentage points to welfare growth per year while improvements in smartphones adds approximately 0.63 percentage points per year.

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