Who Makes the Law? Political Economy Analysis and Evidence from Copyright Levies

Abstract

Are laws made by voters or industry? Here, we address this question in the context of copyright levies. Many Western countries allow private copying subject to a compulsory copyright levy. Applying political economy analysis, we show that (i) content producers always prefer a copyright levy to no levy; and (ii) if ethical costs are high, the median voter will prefer a copyright levy, while the content producers' preference for a levy would be weaker.

Using a new data-set of copyright levies in up to 28 Western Christian countries between 1992-2005, we find evidence that copyright levies are in influenced by both content producers and consumers. Copyright levies are more common in countries where ethical costs are low. Specifically, a reduction in ethical costs by one standard deviation was associated with the odds of a copyright levy being 0.515( /- 0.332) to 1.702( /- 0.823) higher, which suggest that levies were determined by content producers. On the other hand, copyright levies were not universal, which suggests that levies were not determined by content producers. Further, in countries that were more democratic, the odds of a copyright levy were lower with lower ethical costs, which is additional evidence that levies were determined by consumers.

Keywords: median voter, political economy, copyright

JEL Classification: H10, O34, Z10