Big Data: Economic Value, Fintech, and Policy
Paper Session
Friday, Jan. 7, 2022 10:00 AM - 12:00 PM (EST)
- Chair: Daniel Ker, United Nations Conference on Trade and Development
The Data Economy: Economic Value of Data and Data Flow, Profitability, and Global Minimum Tax
Abstract
In the digital era, data is the key input to a firm’s production. Firms using data to organize production, notably Big Tech, enjoy higher productivity and market valuations. However, policymakers in many nations are concerned that Big Tech has not paid its fair share of taxes. A major reason for the gap between expectations and reality is that the value of data has not been capitalized into a firm’s financial statements. I find that Big Tech possesses tremendous value of data, and capitalizing their value of data can increase their profit rates significantly, which can easily meet the criterion of 10% profit margin for the global minimum tax. For example, capitalizing Amazon’s value of data can increase its average profitability by 17% with an annual growth rate of 12.2%. For Big Tech as a whole, the average profitability during the same period of time increases 11.4% with an annual growth rate of 2.8%. Moreover, the estimated global value of data is around three trillion dollars. Nonetheless, even if the global Internet traffic continues to grow, the global value of data may saturate or possibly decline if Big Tech continues to gain a higher share of global data at a rapid pace. This paper also presents the first estimated economic value of cross-region data flows, which is of the order of several hundred billion dollars. The distribution of this value, however, is very uneven due to the inhomogeneity of cross-region data flows. My analysis is useful for policymakers to understand how much economic value of cross-border data flows may be at stake and what are the related transaction costs that may incur for businesses under a data governance and tax policy. The analysis is also important for firms to evaluate the impacts of global minimum tax and data localization policy.The Recording of Crypto Assets in Macroeconomic Statistics
Abstract
Recent years have seen a significant proliferation in the number and types of crypto assets. However, guidance on how to record them in macroeconomic statistics is largely absent. For that reason, the international statistical community has started to explore the statistical measurement of crypto assets, focusing on their specific characteristics. The main questions regarding their classification concern which types of crypto assets should be distinguished, whether they meet the asset boundary, and if so, whether they should be regarded as financial or non-financial assets. Furthermore, an important question is how to account for their creation, i.e. whether or not they should be regarded as the result of production. This is not only relevant in relation to their classification, but is also important in order to assess how the creation of crypto assets may affect important economic indicators such as GDP. This paper presents a proposal for the recording of crypto assets in macroeconomic statistics on the basis of discussions that have taken place in the statistical community over the past couple of years. It presents a classification of crypto assets with accompanying definitions, and discusses pros and cons of specific recording options. This is done by reviewing how their characteristics relate to the asset boundary and to the definitions of financial and non-financial assets as described in macroeconomic statistical manuals. Furthermore, the paper explores the different ways in which crypto assets may emerge, to assess whether or not they should be regarded as result of production. On the basis of these analyses, the paper presents a proposal on how to classify the different types of crypto assets, and also presents some examples of how to account for specific transactions on the basis of this proposal.Payments the Hidden Tool for Policy
Abstract
For decades America’s payment system was viewed as the neutral plumbing that transmitted financial sums and was not considered a tool for greater political goals. In recent years, however, that perspective has changed, and now the payment system is used to implement major policies beyond the facilitation of financial transactions. For example, when Congress sought to ban on-line poker in the mid 2000s, it used the payment system to conduct that policy. The payment system has also become a significant source of income redistribution through the growth high-reward credit cards, available only to the wealthy, and funded by those without access through interchange fees. In foreign policy, as sanctions have become a more frequently used tool against nations such as Iran, they have increasingly been implemented by restricting access to dollar denominated payments and settlement systems for companies and banks who do business with companies or governments in targeted countries. In some instances, the payment system has been a means to achieve an explicit policy end goal instituted by Congress, such as banning activities or imposing sanctions. In other instances, the payment system has been a silent accomplice in a broader structural change, such as the increase in income inequality. This paper analyzes how the payment system has grown as a tool for economic, social, and foreign policy and what that means.Discussant(s)
Leonard Nakamura
,
Federal Reserve Bank of Philadelphia
Andrea Eisfeldt
,
University of California-Los Angeles
Ye Li
,
Ohio State University
David Nguyen
,
Organization for Economic Co-operation and Development
JEL Classifications
- O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights