Economic Analysis Series No. 209

March, 2024

(General Theory)
Economics of Digitalization: Focusing on Measurement Issues and Spillover EffectsTsutomu MIYAGAWA(Articles)
Recording Data as an Asset: Preliminary Estimates on Japanese SNA Toward 2025SNA(Tentative)Yosuke KONO and Naofumi YOSHIMOTOOrganizational Capability and Its Development in Digital Era: Transforming the Value of Data within Organizational ProcessesYuri HIRAI, Hirofumi TATSUMOTO, Fumihiko IKUINE and Toshiya WATANABEThe Economic Value of Personal Data: Difficulty of Grasping and Individual PerceptionsTeppei KOGUCHIICT Investments and Firm Productivity: An Analysis Using Micro DataMiho TAKIZAWA and Daisuke MIYAKAWAThe Impacts of Management and Organization on the Use of Digital TechnologyAtsushi OHYAMADigitalization, Institutional Change, and Government's Role: Approaches from Transaction Cost Economics and New Institutional EconomicsAkihiko SHINOZAKIEconomic Effects of E-government/E-municipality DX: Economic Effects Estimation of DX in Local GovernmentsTetsuo NODA

The full text is written in Japanese.

(Abstract)

Economics of Digitalization: Focusing on Measurement Issues and Spillover Effects

By Tsutomu MIYAGAWA

Digitalization is one of Japan's most urgent policy issues; it is lagging behind compared to other advanced countries. However, the economic effects of digitalization are restrained by the lack of enough data for capturing digitalization. Therefore, the Statistics Bureau should construct com-prehensive databases for digitalization as soon as possible, because the digital industry provides new digital services such as crowd services and AI services. As for the economic effects of digitalization, we examine the spillover effects of digitalization using industry-level data. We find spillover effects from the digitalization of the information service industry and the public sector. We also find complementary factors such as training and organizational change contribute to productivity growth in some estimates. These empirical results tell us that the Japanese government should concentrate its support for digitalization in the information service industry.

JEL Classification Codes: O33, O38, O47
Keywords: IT revolution, Digitalization, Growth accounting, Spillover effects

Recording Data as an Asset: Preliminary Estimates on Japanese SNA Toward 2025SNA(Tentative)

By Yosuke KONO and Naofumi YOSHIMOTO

Since the mid-2010s, the economic significance of data has gained prominence, particularly with the rise of major tech companies like GAFA. This has necessitated the accurate valuation of data within national accounts.

Economic and Social Research Institute at Cabinet Office, has been engaged in foundational research on Data as an Asset since fiscal year 2022, anticipating for future implementation. Drawing on international studies, preliminary estimates of the output of data and related aspects were made and published in May 2023.

As of 2020, the nominal output was estimated at 6.75 trillion yen for data, 1.136 trillion yen for databases, and 5.361 trillion yen for data analysis. These figures indicate a significant increase over the past decade. The estimates were made in a manner that allows for rough comparisons with other countries, revealing similarities in scale and contributions to GDP growth.

However, several conceptual and practical challenges remain. There is a hope for the estab-lishment of a unified international guideline, potentially in the form of an estimation handbook, to be released in the future. Economic and Social Research Institute aims to play an active role in these international discussions as well.

JEL Classification Codes: C43, D60, E22, O3
Keywords: Digital Economy, SNA, Data, Intangible Assets

Organizational Capability and Its Development in Digital Era: Transforming the Value of Data within Organizational Processes

By Yuri HIRAI, Hirofumi TATSUMOTO, Fumihiko IKUINE and Toshiya WATANABE

This study proposes a theoretical framework for the relationship between data use and organizational capabilities. Using a specific case with this framework, we reveal that data resources can be converted to economic value through organizational processes. There are several organizational processes related to these processes, including those related to digitizing tasks (digitization), digitizing business operations (digitalization), and attempting to digitally transform value creation itself (digital transformation). As the latter processes progress, the aspect of business transformation becomes stronger. Furthermore, the required organizational capabilities include "organizational digital innovation (DI) capabilities" related to information technology literacy, "transformation capabilities" for interdepartmental coordination and business process transformation, and "leadership," which is considered a critical factor, to support these organizational DI and transformation capabilities.

We discuss how to perceive the economic value of data and its positioning as an asset based on this framework.

JEL Classification Codes: O33, L21, M15
Keywords: organizational capability, organizational process, data

The Economic Value of Personal Data: Difficulty of Grasping and Individual Perceptions

By Teppei KOGUCHI

This paper examines the economic value of personal data in light of the situation in which personal data is now considered a good.

The economic value of personal data is not self-evident, and currently there is no established method for measuring its value. Existing approaches have their limitations, and the first step is to accumulate analysis of individual services.

There are also difficulties in recognizing the value of personal data. The concept of the pro-duction cost of personal data differs from that of ordinary goods and involves the special factor of privacy. If individuals cannot appropriately provide their own personal data, the way in which personal data is used and its value is distributed may not be desirable.

This paper conducted a survey and analysis of individuals' perception of value, and found that the possibility of individuals providing their personal data varies depending on the type of information, and that individuals may respond differently depending on the form of compensation for the pro-vision of personal data. Furthermore, This paper found that individuals are aware of considerably greater costs compared to current corporate compensatory responses to information leaks.

JEL Classification Codes: L86, L88, L10
Keywords: Personal Data, Value Measurement, Individual Rationality, WTA

ICT Investments and Firm Productivity: An Analysis Using Micro Data

By Miho TAKIZAWA and Daisuke MIYAKAWA

This paper empirically examines the causal effects of ICT investments on firm employment and productivity. Based on an identification strategy using the survey responses of firms about the impact of the tax benefit on their ICT investments, we find the following: The increase in ICT investments responding to the tax benefit resulted in the conversion of internal non-ICT labor to ICT labor. Second, such conversion did not improve labor productivity. These results suggest that additional investments such as the investment on the quality of ICT labor (e.g., ICT literacy) is necessary for ICT investments to improve firm productivity.

JEL Classification Codes: J23, J24, M42, C53, C14
Keywords: ICT investments, tax benefit, ICT labor, human capital investments

The Impacts of Management and Organization on the Use of Digital Technology

By Atsushi OHYAMA

This paper uses the data from the JP MOPS, the Japanese version of the Management and Or-ganizational Practices Survey, to examine how management and organizational practices and structures affect the use of digital technologies (IoT, AI, 3D CAD/CAM). Several past studies pointed to the complementarity between the use of ICT and management/organization structures, and the empirical analysis of this paper tries to contribute to this line of research. The main findings of this paper are as follows. First, establishments with efficient management tend to use digital tech-nology such as IoT, AI, and 3D CAD/CAM. Second, while the allocation of decision-making au-thority between headquarters and establishments is unlikely to affect the use of digital technology, establishments tend to use digital technology when they have many production units or when problems are reported and fixed, and information is shared across production units. A positive correlation exists between technology scores and innovation/kaizen activities. Overall, the empirical analysis of this paper suggests that management and organization matter for the use of digital technology and that the use of digital technology promotes innovation/kaizen activities.

JEL Classification Codes: M11, M12, M15, O30
Keywords: Digital Technology, Management and Organizational Practices, Innovation

Digitalization, Institutional Change, and Government's Role: Approaches from Transaction Cost Economics and New Institutional Economics

By Akihiko SHINOZAKI

The purpose of this paper is to explore the how and why information and communication technology facilitates digital transformation (DX), grounded in transaction cost economics and institutional economics. The study also examines the pivotal roles that the Japanese government sector assumes in addressing the multifaceted challenges confronting the Japanese economy. Digi-talization's impact extends to the operational dynamics within firms and reshapes the boundaries between firms and markets. Furthermore, its impact is unevenly distributed within the market due to the dual functionality of the market, encompassing information processing mechanism and institu-tional system. These dynamics necessitate various institutional reforms, in which a significant role assigned to the government sector. With this analytical framework, government DX assumes three critical roles and functions. Firstly, the government-led DX initiatives are identified as catalysts for fostering analogous endeavors within the private sector, thereby promoting the diffusion of "best practices" since the government sector engages in commercial transactions to a similar scale as the automobile industry. Secondly, the government is obligated to spearhead the reform of institutions, such as competitive policies and regulations in specific industries, conducive to a prosperous digital economy. Thirdly, the paramount concern, surpassing specific details of institutional issues, is the capability to adeptly respond to institutional changes along with technological changes. Given the rapid progress of technology, agility becomes indispensable to address emerging issues and to formulate new institutional frameworks. The crux of government DX lies in the strategic devel-opment and allocation of proficient human resources, coupled with managerial competencies in orchestrating professional knowledge towards navigating the evolving digital economy.

JEL Classification Codes: D23, L22, O17, O38
Keywords: Transaction Cost Economics, Institutional Economics, Technological Change, 　Government's Digitalization

Economic Effects of E-government/E-municipality DX: Economic Effects Estimation of DX in Local Governments

By Tetsuo NODA

Declining birthrate and aging population are urgent issues in local government in Japan, while declining tax revenues are constantly forcing budget and personnel cuts. Then it has become difficult to maintain conventional resident services. DX investment in the industrial field directly leads to an increase in labor productivity as a replacement effect for employment, on the other hand, in a local government's DX investment improves work efficiency (reduces personnel) in a field, so that it makes possible to allocate resources to maintaining and improving resident services. Therefore, after confirming the flow of DX in the Japanese government and local governments, we conducted the "Municipal DX Effect Estimation Questionnaire Survey" with the intention of quantitatively un-derstanding effects of DX implemented in local governments (Municipalities) in Japan. Therefore, after confirming the flow of DX in the Japanese government and local governments, we conducted the "Municipal DX Effect Estimation Questionnaire Survey" with the intention of quantitatively understanding effects of DX implemented in local governments (Municipalities) in Japan. Based on the aggregate results, we estimate economic effects of DX investment in local governments, pri-marily from the perspective of reducing operational costs.

JEL Classification Codes: R
Keywords: E-government, E-municipality, Local Government, DX, work efficiency