Data flows and the digital economy: information as a mobile factor of production

Date14 January 2019
Pages71-87
DOIhttps://doi.org/10.1108/DPRG-08-2018-0044
Published date14 January 2019
AuthorMilton Mueller,Karl Grindal
Subject MatterInformation & knowledge management,Information management & governance,Information policy
Data ows and the digital economy:
information as a mobile factor
of production
Milton Mueller and Karl Grindal
Abstract
Purpose This paper aims to analyze the directionand balance of transnational information flows and
look at how nonpriceddigital information exchanges relatedto international trade in goods and services.
Design/methodology/approach The authorsobtained quantitative data aboutWeb-related data flows
between countries and regionsusing Telegeography data on ‘‘Server Location as a Percentageof Top
Websites.’’They then explore how those flows are correlatedto trade in goods.
Findings Web trafficis highly transnational. More than half ofthe top 100 websites in 9 of the world’s 13
sub-regions are hosted in the USA. More than 15 per cent of the top 100 websites in 9 of the 13
subregions are hostedin Western Europe. East Asia has the largest negative balancein the relationship
between incoming and outgoing Web requests. The authors found a very strong negative correlation
(0.878) between Web traffic balances and the balance of trade in goods across all subregions. A
similarly strong positive correlation was found with services trade; however, the incompleteness of the
data does notallow for strong conclusions yet.
Research limitations/implications Further research is needed to correlate Web traffic flows with
capital flows. The authors also do not have a well-developed theory to explain the strong negative
correlationbetween information flows andgoods trade.
Practical implications The data and analysis have useful implications for digital economy policy. It
indicates that digital protectionism of the sort practice by China may succeed in increasing domestic
producers’ share of Web requests, but does not make them globally competitive. The strong negative
correlationbetween the balance of unpriced Web informationand the balance of trade in goods indicates
interdependence rather than domination, challenging narratives that information flow imbalances are
causedby market power of the big platforms.
Social implications The paper demonstrates the degree to which unpriced digital exchanges are
transnationaland how various countries are more or less globally competitivein the supply of information
that the rest of the worldfinds attractive.
Originality/value No other publishedpapers have used the data on website trafficdata, and previous
researchhas not explored empirically the correlationbetween information flows and goods trade.
Keywords Internet, International trade, Information society
Paper type Research paper
Introduction
Classical notions of trade involve a buyer and a seller transacting across some political
boundary. We call it “international trade” and not just a “market transaction” because
governments, in effect, establish a compulsory man in the middle attack on goods and
service flows that cross their imaginary lines. They define and maintain borders in order to
control and/or tax what comes in or goes out.
Information is often considered a traded good. However, in some ways, the applicability of
the standard trade paradigm to the information economy has been challenged by
Milton Mueller is a
Professor and Karl Grindal
is a PhD Candidate. Both
are based at the Georgia
Institute of Technology,
Atlanta, Georgia, USA.
Received 26 August 2018
Revised 18 October 2018
Accepted 5 November 2018
DOI 10.1108/DPRG-08-2018-0044 VOL. 21 NO. 1 2019, pp. 71-87, ©Emerald Publishing Limited, ISSN 2398-5038 jDIGITAL POLICY, REGULATION AND GOVERNANCE jPAGE 71
technology. To begin with, lots of information is exchanged for no money, and that quantity
increases as technology relentlessly reduces the cost of digital devices and the costs of
information processing, storage and networking. More significant, global convergence on
the internet protocols created a general capability for information exchange that largely
ignores state borders. Digital exchanges do not go through the customs procedures that
are a critical part of collecting merchandise trade data. The globalized nature of internet
traffic was due partly to the historical accident of how the internet evolved, and partly to the
high transaction costs associated with attempts to border digital information flows[1]. While
nationalistic controls are on the rise, it is still true that digital information exchanges are
compared to money, physical goods and people less constrained by national borders
than almost any other form of exchange.
This paper is a preliminary attempt to analyze information as a factor of production in
international trade by examining the direction and balance of digital exchanges. We have
obtained previously unpublished quantitative data about Web-related data flows between
countries, and we explore how the balance of those flows is correlated to the balance of
trade in goods and services. To understand why we think this is interesting, it is necessary
to back up and take note of a conceptual problemthat affects many studies of the emerging
digital economy.
In their study of the cross-border digital economy, the US Department of Commerce’s
Economics and Statistics Administration (ESA) defined four categories of information flow
(Nicholson and Noonan, 2014):
1. purely noncommercial, e.g. government and military;
2. data and service exchanges among businesses at zero price; such as supply chain
information, the issuance of management instructions, internal discussions and
conferences, etc.
3. data flows between a buyer and seller traded at a market price; this includes royalty
payments, banking services, and the purchase of advertising; and
4. digitally enabled services delivered to end users at zero price; this includes services
such as free email, Facebook and other social media.
Like most economic studies, the ESA attempts to measure only Category #3, data that is
traded at a price. “The remaining three categories”, the report says, “require a non-
financial understanding of data flows, and federal economic statistics do not provide a
sound basis for estimating the size of those flows”. This paper is an attempt to both
assess the size and direction of the other flows and to put them into the context of trade
theory by considering them a mobile factor of production. Our data source includes, we
believe, a large segment of category #4 data flows (digital services delivered to
consumers at zero price), and some minor elements of #1 and #2 (non-priced data and
service exchanges within and among organizations). The purpose of this exercise is to
establish the credibility of looking at data flows as factor of production, an insight that has
implications for understanding digital trade and for trade policy, which we explore at the
end.
By information flows as a factor of production, we mean that cross-border information
exchanges are comparable to movements of capital and labor in that they coordinate,
guide and support economic production. Information flows play such a role in any
economic sector, but the rise of a new array of services predicated on the existence of a
globally connected and compatible data infrastructure raises interesting questions about
how information is related to other factor flows and how it fits into trade theory regarding
factor flows. If data are factor of production, one would expect it to be lawfully related to
other flows, e.g. to trade in goods and services.
PAGE 72 jDIGITAL POLICY, REGULATION AND GOVERNANCE jVOL. 21 NO. 1 2019

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