The Economic Impact of Digital Communication

Instructor: Artem Cheprasov

Artem has a doctor of veterinary medicine degree.

This lesson goes over the many ways by which digital communication technologies have and can impact the economy or even personal finances. It will also point out how not everything is as rosy as it seems.

Digital Communication

We use all sorts of digital devices to communicate with one another nowadays — everything from tablets to smartphones and much more. The impact digital communication, and its underlying digital technologies, can have on the economy is quite diverse. In this lesson, we'll go over some ways by which this is so.

The Impact of Digital Communication

The use of digital communication, data transmission from point to point, and technologies has been directly linked to a country's economy. For instance, the more digitization in a nation, the greater its economic development as can be seen with an increased GDP per capita, or gross domestic product per person.

As a specific example of this, a 10% increase in digital communication via improved internet penetration can lead to a 0.9-1.5 percentage point increase in GDP in the United States and the European Union.

Digitization also leads to increased employment, productivity, innovation, and for the appearance of new products and services in an economy. For example, digitization in Latin America helped bring in more jobs and revenues in the fields of e-commerce, video games, and digital advertising.

On a more individual level, one study found that increased broadband penetration in Ecuador was correlated to a 3.67% increase in a person's income.

Of course, not only individuals, but also companies have benefited from increased access to digital communication technologies. One excellent example of this is Netflix. Not all that long ago, there weren't many people with access to high speed internet. As access to this kind of communication medium became more and more widespread, Netflix (and similar companies) took great advantage of it and even switched its business model from movies being sent via mail to movies being seen on-demand.

The Downside

On the flip side, not everyone has benefited handsomely from the increase and breadth of digital communication technologies. In some cases, this is because very large firms may be in a better position to take advantage of improved and ever more widely available digital communication technologies, whereas smaller firms are unable to do so as well. This is one reason why overall employment in the United States is not driven by novel individual entrepreneurship, contrary to popular belief. Instead, more people in the United States work for older, more established, and larger firms.

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