The effects of digitalisation on the economy Cecilia Skingsley, Deputy Governor Entreprenörskapsforum (26 March 2019)
My speech today Digitalisation: Societal changes due to Changed conceptual Increase productivity? technology shift framework for monetary Where are we now? policy
“You can see the computer age everywhere but in the productivity statistics”* *Robert Solow (1987), “We’d better watch out”, New York Times Book Review, 12 July 1987, p. 36.
Low productivity in recent years Falling productivity trend... ...and downward revisions to our forecasts 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 Note. Annual percentage change. The productivity trend is calculated as the GDP trend Sources: Statistics Sweden and the Riksbank divided by the trend in hours worked. The GDP trend is calculated with the aid of a production function and the trend for hours worked is assessed by the Riksbank. The forecasts refer to productivity trends and are the forecasts made prior to the monetary policy meetings in February each year.
Are we in the installation or deployment phase? Digitalisation a possibility, mostly among industrial companies Installation phase • Creative destruction • Exploring new markets • Growth in a couple of sectors and companies Deployment phase • Creative build-up • Markets consolidated • Broad acceptance and major benefits for the entire economy Sources: Bart van Ark (2016) and the Riksbank’s Business Survey in May Note. Percentage of responses. 2018.
Major structural changes over time... Major changes in the labour force... ...but employment rate has been high 60% 60% 55% 55% 50% 50% 45% 45% 40% 40% 35% 35% 30% 30% 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Sources: Edvinsson, R, (2005) ‘Growth, Accumulation, Crisis: With New Macroeconomic Data for Sweden’, Almqvist & Wiksell Inte rnational; Note. Percentage of employed and Stockholm. Edvinsson, R (2014), ‘The Gross Domestic Product of Sweden within present borders, 1620–2012’, in Historical Monetary and percentage employed in the population. Financial Statistics for Sweden, Volume II: House Prices, Stock Returns, National Accounts, and the Riksbank Balance Sheet, 1620 – 2012 (eds. Rodney Edvinsson, Tor Jacobson and Daniel Waldenström) Sveriges Riksbank and Ekerlids and Statistics Sweden.
...with steady increases in welfare Real GDP per capita 350000 350000 300000 300000 250000 250000 200000 200000 150000 150000 100000 100000 50000 50000 0 0 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Note. SEK, year 2000 prices. Source: Edvinsson, R (2014), ‘The Gross Domestic Product of Sweden within present borders, 1620–2012’, in Historical Monetary an d Financial Statistics for Sweden, Volume II: House Prices, Stock Returns, National Accounts, and the Riksbank Balance Sheet, 1620 – 2012 (eds. Rodney Edvinsson, Tor Jacobson and Daniel Waldenström) Sveriges Riksbank
However, clear challenges in the short term... • Changeovers look simple in data terms • Overall improvements are not frictionless at individual level
...but they can be tackled • Embrace life-long learning • The transfer system is the primary tool for managing economic redistribution • If necessary, some markets can be regulated to safeguard efficiency and competition in the interests of the general public
How digitalisation can affect inflation Cheaper ICT products for consumers Pressure on wages Automation Lower costs Digital Higher Lower technological productivity inflation developments Better-informed consumers Lower price mark-ups Increased competition Source: Article “Digitalisation and inflation” e-commerce Monetary Policy Report, February 2015
Often lower employment is expected in Swedish companies... Note. Response frequency, per cent. Consumer-related companies are those selling Sources: The Riksbank's Business Survey in May 2018 and Fudurich et al, “Adoption goods or services to private individuals. The question was: How do you think the use of of digital technologies: Insights from a global survey initiative”, to be published as digital technology will affect the number of employees in your company over the Staff Analytical Note, Bank of Canada coming three years?
...and primarily among consumer-related companies Note. Response frequency, per cent. Consumer-related companies are those selling goods or services Source: The Riksbank’s business survey in May 2018 to private individuals. The question was: How do you think the use of digital technology will affect the number of employees in your company over the coming three years?
We are buying things online more often Rising percentage have bought goods or services online... ...high profitability in a European perspective 80 70 60 50 40 30 20 10 0 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Note. Refers to percentage of population that have bought a product or service Source: Eurostat. online in the past three months.
E-commerce has become increasingly important in Sweden 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Note. Percentage of retail trade turnover Sources: HUI Research and E-Barometern.
ICT goods - little affect on inflation ICT goods not contributing more negatively to ...and on the whole the contribution to the inflation now than before... CPIF is small 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 -8 -10 -10 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Note. Annual percentage change. The blue line represents ICT-related products, Sources: Statistics Sweden and the Riksbank. which include household appliances, telephony, TVs, cameras, CDs, DVDs, toys, books and newspapers. The red trend line is a three-year moving average.
Similar effects on prices as in other countries expected... Note. Response frequency, per cent. Consumer-related companies are those selling goods Sources: The Riksbank's Business Survey in May 2018 and Fudurich et al, “Adoption or services to private individuals. The question was: How do you think the use of digital of digital technologies: Insights from a global survey initiative”, to be published as technology will affect the selling price of your goods and services over the coming three Staff Analytical Note, Bank of Canada. years?
...but primarily lower consumer prices Note. Response frequency, per cent. Consumer-related companies are those selling goods or Source: The Riksbank’s business survey in May 2018 services to private individuals. The question was: How do you think the use of digital technology will affect the selling price of your goods and services over the coming three years?
Inflation and e-commerce in Europe Note. The y axis shows the annual percentage change in the HICP and the x axis shows the country's share of trade in the form of e-commerce. Each Source: Eurostat. circle in the figure represents a country for one year. The countries included are Austria, Belgium, Bulgaria, Croatia, Cypru s, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, N etherlands, Norway, Poland, Portugal, Rumania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.
Credible inflation target an anchor for the economy Note. Annual percentage change. The CPIF is formal target variable since 7 Source: Statistics Sweden September 2017.
Summarising points • Changes such as digitalisation are decisive to our welfare in the long run • But transitions are never painless • Can often be managed by other policy areas • Clear game rules facilitate structural changes • Reliable price stability, in terms of purchasing power, is one such game rule
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