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ACCELERATING GROWTH
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Box 1.5 The growth impact is largest when firms in traditional sectors use
digital technologies to modernize their business
The digital economy accounts for about 6 percent of gross
domestic product (GDP) in OECD (Organisation for Economic
Co-operation and Development) countries (figure B1.5.1). a
In the United States, which hosts some of the biggest tech
companies, the value added of information and communication
technology sectors in GDP is 7 percent, compared with
13 percent in real estate, renting, and leasing; 12 percent in
wholesale and retail trade; and 8 percent in finance and insurance
or health and social services. b The value added of information
and communication technology (ICT) sectors in GDP
is the highest in Ireland (12 percent), thanks to large inflows
of foreign direct investment. In Kenya, which hosts one of the
largest ICT sectors among African countries, the value added
share of ICT services in GDP was 3.4 percent in 2013; that
includes telecommunications (and thus mobile money). c
Despite the strong growth and high market valuations
of internet firms offering conventional services, their market
shares in these traditional sectors to date have been
Source: OECD 2015. Data at http://bit.do/WDR2016-FigB1_5_1.
relatively small. Consider Amazon. In the United States, its
home market, Amazon accounted for only 1.7 percent of the
retail market in 2014; e-commerce accounted for about 7
percent of the U.S. retail market in 2015. By contrast, offline
sales accounted for more than 99 percent of all sales of food
and beverages; 84 percent of clothing and furniture; and 59
percent of books, magazines, and music. d
Less visible but more important for growth, incumbent
firms in traditional sectors invest in digital technologies to
save costs by optimizing their production and management
processes. The McKinsey Global Institute estimates that 75
percent of the economic impact of the internet in 12 large
developing and developed countries originates in firms
in traditional sectors—firms that would exist without the
internet but that use it to increase their cost-effectiveness. e
The findings are consistent with studies showing that the
bulk of U.S. productivity growth over the past 15 years originated
in ICT-using, not-producing sectors. f
Figure B1.5.1 The ICT sector accounts for 4–7 percent of GDP in most OECD
countries, 2011
Percent
14
12
10
8
6
4
2
0
Austria
Norway
Poland
Portugal
Iceland
Belgium
Spain
Slovenia
Greece
Italy
Canada
France
Germany
Netherlands
Denmark
Czech Republic
Slovak Republic
Finland
Sweden
Estonia
Luxembourg
United States
Hungary
Switzerland
United Kingdom
Japan
Korea, Rep.
Ireland
Note: ICT value added is the difference between the ICT sector’s gross output and intermediate consumption. The data are from 2011. The aggregate of
information industries here includes ISIC rev. 4 division 26 (manufacture of computer, electronic and optical products) and section J (information and
communication), which in turn comprises divisions 58–60 (publishing and broadcasting industries), 61 (telecommunications), and 62–63 (computer
programming, and information service activities). ICT industries are broadly defined, as they include publishing and broadcasting, trade and repair
activities, and media and content industries (Division 63.9).
a. The McKinsey Global Institute (Manyika and others 2011) used a different approach to compute the contribution of the internet to GDP. It computes the
total value of three main activities based on the internet: activities using the internet as support (e-commerce, online content, or advertising); internet
service providers; and software and internet service activities such as IT consulting, hardware manufacturers (computers, smartphones, or hardware
equipment). They find that these activities account on average for 3.4 percent of GDP among the G-8 countries, Brazil, China, India, the Republic of
Korea, and Sweden in 2009. The impact is largest among the developed countries. The shares include publishing and broadcasting activities and
media and content industries.
b. The classification includes internet firms such as search engines, but not online retailers. The market share of online retailers is, however, still relatively
small: Amazon accounted for only 1.7 percent of the retail market in the United States in 2014; see http://www.bea.gov/.
c. World Bank 2015.
d. Economist 2014, 2015b.
e. McKinsey Global Institute (Manyika and others 2011). The results are based on a survey of 4,800 small and medium enterprises in the following 12
countries: Canada, China, France, Germany, India, Italy, Japan, the Republic of Korea, the Russian Federation, Sweden, the United Kingdom, and the
United States.
f. See, for example, Jorgenson 2001, 2011.