Knowledge Accumulation, Privacy, and Growth in a Data Economy

51 Pages Posted: 15 Oct 2019 Last revised: 12 Oct 2020

See all articles by Lin William Cong

Lin William Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management

Danxia Xie

Tsinghua University - Institute of Economics

Longtian Zhang

Tsinghua University

Date Written: October 8, 2020

Abstract

We build an endogenous growth model with consumer-generated data as a new key factor for knowledge accumulation. Consumers balance between providing data for profit and potential privacy infringement. Intermediate good producers use data to innovate and contribute to the final good production, which fuels economic growth. Data are dynamically non-rival with flexible ownership while their production is endogenous and policy-dependent. Although a decentralized economy can grow at the same rate as the social optimum on the Balanced Growth Path, the R\&D sector underemploys labor and overuses data---an inefficiency mitigated by subsidizing innovators instead of direct data regulation. As the data economy emerges and matures, consumers' data provision endogenously declines after a transitional acceleration, allaying long-run privacy concerns but portending initial growth traps that call for interventions.

Keywords: Big Data, Data Ownership, Endogenous Growth, Innovation, Non-rivalry, Privacy Regulation

JEL Classification: E23, E27, K11, O11

Suggested Citation

Cong, Lin and Xie, Danxia and Zhang, Longtian, Knowledge Accumulation, Privacy, and Growth in a Data Economy (October 8, 2020). Available at SSRN: https://ssrn.com/abstract=3464729 or http://dx.doi.org/10.2139/ssrn.3464729

Lin Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.linwilliamcong.com/

Danxia Xie

Tsinghua University - Institute of Economics ( email )

MingZhai Building
Beijing, 100084
China

HOME PAGE: http://danxiaxie.com

Longtian Zhang (Contact Author)

Tsinghua University ( email )

MingZhai Building
Beijing, 100084
China
+8615210593493 (Phone)

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