Measuring the digital economy for policy modeling: Evidence from sectoral value added in OECD economies

This study assesses whether current Digital Economy measurement frameworks provide useful information to policymakers regarding sectoral value creation. A number of measurements and composite indexes have been developed to monitor Digital Economy on behalf of governments, investors, and other stakeholders. However, the relationship between these types of indexes and sectoral economic performance has received little attention. This study investigates the association between more than 250 Digital Economy related indicators from a variety of internationally recognized frameworks (DESI, G20 Toolkit for measuring the Digital Economy, ITU Measuring Digital Development indicators, World Digital Competitiveness Rankings, Digital Intelligence Index, Inclusive Internet Index, OECD Digital Well-being indicators and Mobile Connectivity Index by the GSMA) and 20 ISIC Rev.4 sectors in a panel of 37 OECD countries from 2005 to 2023. Sector specific two-way fixed effect models with LASSO based screening, along with macro-economic control variables and FDR adjusted tests were employed to evaluate each framework's indicator level performance. This paper does not attempt to develop an additional composite measure nor estimate structural causal relationships. Instead, it provides a diagnostic approach to examine whether existing digital policy dashboards correspond to sectoral GVA. The study found significant heterogeneity both between sectors and between frameworks. Indicators which capture usage/diffusion/and/or ecosystem dynamics tend to exhibit stronger positive and relatively consistent associations with sectoral GVA. On the other hand, the access/readiness type indicators showed generally weaker and less predictable associations. These findings suggest that individual headline national Digital Economy dashboard should not be assumed to be mutually replaceable modeling inputs. Rather, greater granularity in terms of indicator level and sector specificity will be required if digital strategies, cohesiveness in policy design, and priority investments are to be supported effectively.