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Digital economy

The shift from analogue to digital information technology started more than half a century ago with the invention of the first computers. Over the last two decades, the rapid decline in computing costs, the emergence of the internet as a communication tool and the proliferation of day-to-day applications on the internet have profoundly affected the organisation of businesses and personal life, and the functioning of the economy. It has brought many benefits to consumers and businesses. However, it has also created new problems and policy issues.

Policy makers struggle to put in place appropriate policy responses; economists and social scientists also struggle to develop new tools and datasets that can address these issues.

The Digital Economy research programme aims to address some of these economic policy issues for the EU. Its main focus is on:

  • empirical research related to the EU Digital Single Market
  • Copyright policies

Previously, some research has been carried out on the impact of digital technology on employment, and on consumer benefits from the internet.

The Digital Single Market and remaining barriers to e-commerce

The creation of a borderless Single Market for trade in goods, services, capital and labour has been a major objective ever since the start of the EU. This objective has been extended to online markets and the achievement of a borderless Digital Single Market has become a policy priority for the current European Commission.

Although distance should in principle not play a significant role in online markets, all kinds of barriers may still hamper consumer access to online services in other countries. The EU seeks to eliminate these barriers.

This area of research has several objectives:

  • Data collection: In the absence of official statistics, the volume of online domestic and cross-border trade in services – both monetized and “free” online services – has to be estimated, using a variety of data sources.
  • Economic analysis: We use econometric analysis to estimate the impact of cultural, geographical, regulatory and commercial barriers to online services delivery in the EU on the welfare of consumers and producers.
  • Policy advice: We assist the European Commission in the design of policy measures that can contribute to reducing obstacles to online cross-border trade

So far, the research has produced a number of studies on the drivers and impediments to cross-border e-commerce in the EU, and on supply-side barriers and the macro-economic impact of cross-border e-commerce. Attention has now shifted to a wider range of online services and to possible regulatory barriers to online services delivery.

Copyright issues in the Digital Media

The shift from analogue to digital technology has caused a very substantial reduction in production and distribution costs for digital media such as music, film, books and news.  This, in turn, affects copyright protection, business models and revenue for media producers and copyright holders, and consumer welfare.

Copyright protection and remuneration of rights holders have become major issues in the media industries. At the same time, digitisation has vastly increased the supply of media products for consumers. Despite a rapid shift to online distribution, transaction costs are still relatively high in EU media markets because they remain fragmented across countries and distribution channels. 

All this has triggered a debate in the EU on the need to revise EU Directives related to copyright and audio-visual media. The European Commission is committed to adapting the regulatory setting to these new technologies and present policy proposals in 2015 and 2016. The public debate on copyright is often very partisan and marked by the absence of empirical evidence. This research looks at copyright from an empirical economics perspective and aims to fill major holes in the empirical evidence gap and thereby contribute to a more constructive debate. 

The objectives of this research are:

  • To estimate the extent of copyright infringement and displacement of legal sales in digital media and to measure the effectiveness of measures to enhance copyright protection on the internet.
  • To investigate the patterns of cross-border availability and accessibility of copyright-protected digital media in the EU and to examine the impact of different types of barriers – including cultural diversity, the EU copyright regime and commercial restrictions – on consumer and producer welfare.
  • To estimate the impact of digitisation on the production of creative media works and how it affects the prime objective of copyright: stimulation of artistic creativity. From a public policy perspective it is important to get a better picture of the net impact of the potentially positive (reduction in production and distribution costs) and negative (pressure on revenue, increased piracy) effects of digitization on consumer and producer welfare.  Assessing that net impact is an empirical question.

 

Other related research

There is a substantial volume of macro-economic research on the contribution of digital technology or ICT to GDP and productivity growth. It looks at the impact of digital technology on the market part of the economy, the value of transactions in the market. Many benefits of ICT are not the subject of monetised transactions. The internet, for example, offers many “free” online services and consumers derive considerable surplus value from digital technology, over and above what they pay for it.

The Digital Economy research programme has also looked at the demand side, finding that the internet has substantially contributed to consumer welfare and that the much-feared “digital gap” may actually have been reversed because low-income low-skill consumers make relatively more intensive use of the internet.

 

The impact of ICT on employment is another issue that concerns European policy. A literature review showed that there is very little empirical research on the impact of ICT on employment in the EU. The Digital Economy research programme started its own empirical research on this topic. So far we find that ICT has a positive impact on employment, both at firm and at sector level.

 

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