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Digital economy

Digital economy refers to an economy that is based on digital computing technologies, but is often perceived as conducting business through markets based on the internet and the World Wide Web. The digital economy is also referred to as the Internet Economy, New Economy, or Web Economy. The digital economy is intertwined with the traditional economy, making a clear delineation harder. This results from billions of everyday online connections among people, businesses, devices, data, and processes. It is based on the interconnectedness of people, organizations, and machines that results from the Internet, mobile technology and the internet of things (IoT). Without the internet, the digital economy that the global economy runs on would not exist in the current capacity that it's currently functioning in.

The digital economy is backed by the spread of Information and Communication Technologies (ICT) across all business sectors to enhance its productivity. Digital transformation of the economy is undermining conventional notions about how businesses are structured, how consumers obtain services, informations and goods and how states need to adapt to these new regulatory challenges. The future of work, especially after the COVID-19 pandemic, is also contributing to the digital economy. More people are now working online than ever before. And with the increase of online activity that contributes to the global economy, the companies that support the systems of the internet are more profitable than ever before.

The term "Digital Economy" is also referred to as the New Economy. It refers to an Economy in which digital computing technologies are used in Economic Activities. The term was first mentioned in Japan by a Japanese professor and research economist in the midst of Japan's recession of the 1990s. In the west the term followed and was coined in Don Tapscott's 1995 book, The Digital Economy: Promise and Peril in the Age of Networked Intelligence. This book would go on to explain how the internet would change the way the world did business.

Before any economy was able to use digital computing technologies, all transactions happened offline, or off of the world-wide-web. It wasn't until the late 1990's where the thought of online economic transactions became an idea. Over the next two decades, the pivot from the traditional cash and check economy to one for the new digital age changed the global economy forever. In this new economy, digital networking and communication infrastructures provide a global platform over which people and organizations interact and search for information that helps make basic connections between different sectors of the economy.

Development of the concept

The definition of Digital Economy (or similar concepts) is not harmonized across governments, businesses, and international organizations. According to the OECD, the Digital Economy can be defined in three different approaches:

• Bottom-up approach: characterizing industries’ and firms ‘output or production processes to decide whether they should be included in the Digital Economy
• Top-down or trend-based approach: first identifying the key trends driving the digital transformation and then analysing the extent to which these are reflected in the real economy
• Flexible or tiered approach: breaking the Digital Economy into core and non-core components, and thereby finding a compromise between adaptability and the need to arrive at some common ground on the meaning of the term

A smart transaction device, linking an individuals phone to the global and digital economy.

Bottom-up definition

Bottom-up definitions define the Digital Economy as the aggregate of a specific indicator for a set of industries identified as actors in the Digital Economy. Whether an industry is considered an actor in the Digital Economy depends on the nature of the products made (narrow) or proportion of digital inputs used in the industry's production processes (broader).

The Digital Economy is "all industries or activities that directly participate in producing, or crucially reliant on digital inputs." While this definition is adept at measuring the impact of digitalization on economic growth, it only focuses on the nature of output and offers an incomplete view of the Digital Economy's development.

In a bottom-up and broad perspective, the Digital Economy is "all industries using digital inputs as part of their production process". Examples of digital inputs include digital infrastructure, equipment, and software but can include data and digital skills. These digital inputs are vital for the success of the Digital Economy and often times dictate the effectiveness of online economy communications. The advancement of payment systems (like one pictured on the right) is an example on how certain equipment is still required for person to person economic interactions that are part of the digital economy.

Top-down definition

Top-down definitions start from the identification of broad trends at play in the digital transformation and define the Digital Economy as the result of their combined impact on value creation, including such spillovers as changes in labor market demand and regulations, platform economy, sustainability, and equality.

Unlike the bottom-up definition, the top-down definition has units of analysis extending beyond firms, industries, and sectors to include individuals, communities, and societies.

Gig Economy

Gig work is labor that consists of temporary and flexible jobs that are usually done over delivery apps and rideshare services such as Grubhub, Uber, Lyft, and Uber Eats

The birth of the gig economy has become desirable to those who want to have more flexibility in their schedule. It allows those even with full-time employment to make some side money when they clock out of their day job.

Most people who chose to do gig work, however, rarely make it more than a side hustle. he number of platforms and the size of the gig economy have yet to be accurately quantified. Since these workers are considered independent contractors, these companies are not responsible for giving its workers benefits like it would a regular full-time employee. This has resulted in the formation of unions between gig and platform workers and various reforms within the industry.