This article aims to investigate the patterns of flows in data around the world. It does so by starting from the proposition that data are used as inputs into the production of services and goods in the economy. Using new BEA input output tables in which data usage has a specific mention, this paper computes data intensities of all 6-digit downstream industry sector activities inside the US. This paper finds that not only are sectors such as telecoms and data processing industries using data most intensively, but that in addition data are heavily used as an input within multinational companies with regards to management decisions and with the aim of administering, overseeing and operating establishments across countries. These results are surprising insofar as most of the policy debate to date has focused on the cross-border movement of personal data which is obtained from the interaction between companies and consumers and not so much on companies using business data that are not necessarily personal. This paper also traces who in the world are the biggest traders of these data-intensive management services and provides a first estimate of how much value-added are traded in management services. In addition, this paper also provides an analysis of which type of countries actually have comparative advantage in trading management services. Finally, a discussion is given on the policy implications regarding the usage of data-intensive services inside firms.
JEL Codes: F13, F14, F15, F23, O24
In today’s world, the flows of data across countries are an additional force of globalisation besides the flows of goods, services, people and capital. Although the notion of data is relatively new, many companies use some kind of data in their production process that adds value to their daily activities as part of the so-called digital economy. Economic activities in the digital economy span a wide diversity of goods and services which can vary from digital products to online services and e-commerce to pure cross-border data flows or traditional telecom services and software. The common feature of all these sectors is that value is put to data in their production processes, either as inputs or as output.
However, where exactly are data used and produced inside the economy? Moreover, as data are utilised in the many production activities of firms, where are these data traded across countries? And who has a comparative advantage in trading data? These are some of the issues that this paper tries to uncover by using various data sets currently available.
To date not much is known about the flows of data and only a small set of papers have looked into this area of research. One set of papers investigates the role of the various regulations in data flows and their associated cost effects such as Bauer et al. (2013; 2014) and Christensen et al. (2013). The conclusions of these papers point to the fact that regulatory barriers in the transfer of data across borders are likely to have a detrimental effect on trade, output and employment. Another set of papers looks into the so-called data-enabled trade in services (Meltzer, 2014) or looks into the specific links between data and the role of e-commerce (Martens, 2013). However, none of these papers offers detailed analyses of where data is produced and used.
Therefore, this paper provides an answer to the above-mentioned questions by investigating the role of data produced and used by goods and services industries, and consequently looks at where these goods and services are traded across countries around the world. It does so by first using detailed input-output information that traces to a highly disaggregated level how much value of data input goes into each downstream industry sector covering 6-digits goods and services inside the US economy. Interestingly, we conclude that although many data are unsurprisingly used in sectors such as telecommunications and data processing services, an equally big share of data are actually employed for management purposes inside multinational companies. Secondly, this paper investigates the patterns of trade in management and other data-intensive services using the most recently available data on international trade in services.
In addition, since gross figures of trade tell us only one side of the story, this paper also comes up with preliminary calculations that ‘guesstimate’ the amount of value added that is produced and exported regarding these management and other data-intensive services for a typical European country like France. These simple computations show us that although management services themselves do represent only a smaller share of the entire value-added exported in services, they nonetheless can be of equal importance to other services such as finance. However, not all countries tend to specialise in data-intensive management services. Therefore, this paper also tries to uncover what actually determines the fact that some countries have comparative advantage in data-intensive services, including management services, whilst others do not. Finally, a short discussion on the policy implications regarding management services that use data within multinational companies is given at the end of the paper.
This paper is organised as follows. The next section sets out a framework through which one can see the use and production of data in the economy from, respectively, an input (upstream) and output (downstream) perspective. The third section calculated the so-called data intensities of sector by analysing the extent to which data is used as an input in the production of these downstream industries. Next, the fourth section tries to match these data-intensive industries with trade data in an attempt to examine which countries are the main traders of data. Finally, as our results show that a high amount of data is traded inside multinational companies, a policy discussion based on these findings is given in the conclusion of the paper.