A new measure of digital economic activity and its impact on local opportunity

Abstract

Online businesses and platform work can create the impression that the digital economy is ephemeral and placeless. But the digital economy is experienced locally, and its effects are spatial. Measuring them requires better community-level data on economic activities online. While new government data measures broadband subscriptions down to neighborhoods, existing public data do not measure how broadband is used in local communities, and whether this digital activity affects economic outcomes. We analyze new monthly data on over 20 million domain name hosts/websites in the United States from November 2018 to November 2020 drawing on customer data. Surveys show that 3 out of 4 of these domains are commercial, including microbusinesses as well as websites for both online and brick-and-mortar establishments. How is the density of domain name hosts in a community (the number in a zip code or county divided by the population) related to local economic opportunity, controlling for other known factors? Using statistical matching and time series data, results show the density of domain name hosts positively predicts community economic prosperity, recovery from the 2008 recession, and change in median income. Interactions between the density of these hosts and broadband subscriptions also predict lower monthly unemployment rates over time, including after the March 2020 pandemic. Commercial data can improve our understanding of broadband's impacts, including its potential for inclusive growth in diverse communities.