Will big data deliver its promised productivity growth?
Will big data deliver its promised productivity growth?
Friday, 18 March 2016: 9:40 AM
The volume of data created every year in the world started to increase sharply with the arrival of the personal computer but has stepped up considerably the pace with the internet and the mobile phone This proliferation of data has been made possible by three technological innovations: processing, storage, and information and communication technologies. These innovations have changed our professional and free time activities in a convergent way. Most of our acts now proceed through screens and hard disks even in blue-collar jobs. These new work and playful tools are also new media through which all our acts are inexorably "dataficated". Digitalization necessarily implies the production of data in unprecedented quantity, systematically stored in the new magnetic and optical media. This massive creation of digital footprints is not only stored at low cost but also cheaply transmitted electronically through communication technology (telephone, radio and TV, and the internet). The "datafication" of almost everything and the rapid electronic transmission of all these data characterize this contemporaneous phenomenon called 'Big data'.
There are high economic expectations concerning the emergence of Big Data: a promised golden age for both consumers and firms. Digital technology allows firms to provide digital services in exchange of personal data, from which they can fine-tune their supply to better match market demand. By extending Arrow (1962)'s analysis of the market for information to the phenomenon of Big Data, we propose a theoretical assessment of its potential effects on productivity growth. Our study highlights that Big Data modify the market for information by introducing new informational products which are not public goods. This characteristic is crucial as it implies that private production of personal-data based information can be profitable. This profitability gives digital firms the incentive to produce information likely to improve firm-level productivity and consumer welfare. Finally, we conclude that the productivity effect of Big Data at the macroeconomic level is conditional on both the production and diffusion of this personal-data based information.
There are high economic expectations concerning the emergence of Big Data: a promised golden age for both consumers and firms. Digital technology allows firms to provide digital services in exchange of personal data, from which they can fine-tune their supply to better match market demand. By extending Arrow (1962)'s analysis of the market for information to the phenomenon of Big Data, we propose a theoretical assessment of its potential effects on productivity growth. Our study highlights that Big Data modify the market for information by introducing new informational products which are not public goods. This characteristic is crucial as it implies that private production of personal-data based information can be profitable. This profitability gives digital firms the incentive to produce information likely to improve firm-level productivity and consumer welfare. Finally, we conclude that the productivity effect of Big Data at the macroeconomic level is conditional on both the production and diffusion of this personal-data based information.