In our previous blog we calculated the Dutch Gross Domestic Digital Product (GDDP) at € 129 billion almost a quarter of GDP. However this is only the direct effect of ICT on the Dutch economy.
In reality the impact of ICT on the Dutch economy goes somewhat further than that. The € 129 billion of our GDDP reflects just one side of the Dutch Digital Economy. The other side of the Dutch digital economy is formed by the upstream effect caused by the Dutch digital economy. In economic terminology we should refer to this effect as the indirect and the induced impact of ICT of the Dutch economy.
In our Digital economy model we can distinguish the following impacts:
- Direct impact. This is the sum of Digital Value Add generated by all Dutch organizations and equals Dutch GDDP
- Indirect Impact. This is the extra Digital Value Add (DVA) generated by sectors that provide goods and services for sectors using and creating information technology.
- Induced Impact: This is the extra DVA that is generated by the extra household spending stemming from the direct and indirect impact of ICT.
Summing up the direct, indirect and induced effect of the digital economy would give us the Dutch Digital Footprint.
In order to calculate the Digital Footprint we need to calculate the indirect and induced effect of ICT on the Dutch economy to show how the impact of ICT ripples through the Dutch economy. To do that we will use an input-output model describing the flow of value add effects of ICT-usage in our economy.
To do this exercise correctly we need to apply the input-output numbers from the Dutch Central Bureau of Statistics(CBS). The last CBS input-output table dates from 2012 and will serve as the base for our calculations. Following Leontief’s input- output analysis we can calculate the indirect and induced impact of ICT for the Dutch economy: the ICT multiplier effect. While the CBS shows input output transaction data for 76 different sectors, we will limit our calculation to 4 sector categories for reasons of simplicity:
- Primary Sector: agriculture, forestry, fishing and mining
- Secundairy Sector: industry
- Tertiairy Sector: commercial services
- Quartery Sector: non-commercial services
At a later stage we will segment the Dutch digital economy into 76 sectors to come up with a more precise Digital Footprint.
The outcomes of our Digital Output model shows a total Digital Footprint of €281 billion. This is more than twice the size of the Digital Economy of €129 billion. The ripple effect generates and additional € 152 billion.
This first sizing of the Dutch digital footprint using Leontief’s input-output model clearly shows that the impact of ICT is far reaching. Moreover it adds up close to 50% of Dutch GDP.
It is also clear that large differences exist between sectors. The commercial services sector total DVA (direct + indirect+ induced) is more than 75% of the total Gross Value Add and more than a third of our total GDP. At the same time we notice the non-commercial quaternary sector falling behind in term of digital footprint.
Now that we have established a baseline for the total impact of ICT on our current economy it is interesting to see what the digital opportunity is for the various sectors. One could argue that those sectors with a small footprint have the biggest opportunity. On the other hand the nature of economic activities may very well limit the digital opportunity of these sectors while at the same time sectors with a large footprint may still have a lot of digital opportunity left. In our next blog on the digital economy we will take a stab at the digital opportunity of the Dutch economy.
The METISfiles is planning a series of reports that will chart the Dutch Digital Economy on a sector by sector basis. If you are interested in these forthcoming reports please contact Simone de Bruin for additional info.