 The Macroeconomics of Free Digital ServicesLionel Ragot (lragot@parisnanterre.fr) and Mathilde Aubouin No 2024-20, EconomiX Working Papers from University of Paris Nanterre, EconomiX Abstract: Digital technology has enabled the rise of free digital services financed by advertising. These services are increasingly popular and enable a few digital firms to generate significant revenue, although GDP does not directly consider them. This paper presents a growth model with digital services providers collecting household data in exchange for their services, which are used to sell targeted advertising to traditional firms. It enables us to study the impacts of this sector on key macroeconomic aggregates and welfare within the American context. Our results highlight that enhanced activity among large providers (new entry, greater efficiency in producing service quality or advertising) positively impacts the economy. Data collection enables small providers to compete with large ones, which benefit from greater user attention. Household preferences, such as sensitivity to privacy, also play a role, potentially hindering the free digital services sector’s economic impact. Keywords: Economic growth; Digital economy; Data economy; Privacy; Advertising (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2024-20 Access Statistics for this paper More papers in EconomiX Working Papers from University of Paris Nanterre, EconomiX Contact information at EDIRC. |
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