The rise of information technology and big data analytics has given rise to "the new economy." But are its economics new? This article constructs a classic growth model with data accumulation. Data has three key features: 1) Data is a by-product of economic activity; 2) data enhances rm productivity; and 3) data is information used for resolving uncertainty. The model can explain why data-intensive goods or services, like apps, are given away for free, why rm size is diverging, and why many big data rms are unprotable for a long time. While these transition dynamics differ from those of traditional growth models, the long run features diminishing returns. Just like capital accumulation, data accumulation alone cannot sustain growth. Without improvements in non-data-productivity, data-driven growth will grind to a halt.
Farboodi, Maryam, and Laura Veldkamp. "A Growth Model of the Data Economy." Columbia Business School, October 29, 2019.
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