Studies show economy gains from the Internet

InternetNZ (Internet New Zealand Inc) today released two studies from Wellington consulting houses NZIER and Infometrics exploring the impact the Internet is having on New Zealand’s economy.

InternetNZ Chief Executive Vikram Kumar says the studies are the first careful look New Zealand experts have taken into how the Internet is changing the economy. They form an initial step towards strengthening InternetNZ’s understanding of the subject: the studies raise questions as well as setting out initial thinking.

“We asked Infometrics and NZIER to look at the Internet from an economist’s point of view, and to explore the impact it has across the economy. These studies do not look at the ‘Internet economy’ or the broadband market. They explore how the Internet can change everything,” he says.

In taking an interest in the whole economy, InternetNZ was surprised to find that there are no previous studies from a New Zealand perspective that looked at the impact the Internet is having. Most studies look at the economic activity that faster broadband might spur, or the effects on particular sectors.

The two reports (available at www.internetnz.net.nz/ecoresearch) provide a solid review of the international scholarship in this area, and advance important understanding of how the Internet, as an emerging general purpose technology, is changing things.

The Infometrics paper discusses conceptual economic issues relating to the Internet. It focuses on the Internet’s ability to better match production of goods and services with what people want, and lowering the cost of finding information. It also discusses the ‘network externalities’ emerging as more and more people gain access to the Internet.

Reviewing international studies for credibility, Infometrics estimates a probable existing economic impact of between 5 and 9 percent of GDP in developed economies, depending on Internet take up. There are further gains from improved consumer welfare that aren’t captured in economic statistics.

“NZIER’s study shares the view that measuring economic impact is difficult due to the wide array of changes the Internet is inducing. They consider that a transport metaphor is useful for thinking about the Internet’s impact on the economy, effectively reducing transport costs for New Zealand firms,” says Kumar.

“Both studies suggest that disruptive innovation has already happened and is likely to continue. The overall impact is improving productivity and the wellbeing of New Zealanders. Protecting and promoting the Internet will protect and promote New Zealand’s economic future,” he says.

Speakers from Infometrics and NZIER will present the findings of these papers at NetHui in Auckland on Friday. A brief outline of each report is appended below. Full copies of the reports can be read online at www.internetnz.net.nz/ecoresearch.