International Protection of Consumer Data

53 Pages Posted: 9 Sep 2020

See all articles by Yongmin Chen

Yongmin Chen

University of Colorado at Boulder - Department of Economics

Xinyu Hua

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Keith E. Maskus

University of Colorado at Boulder - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: June 2020

Abstract

We study the international protection of consumer data in a model where data usage benefits firms at the expense of their customers. We show that a multinational firm does not balance this trade-off efficiently if its data usage lacks (full) transparency or if consumers’ privacy preference differs across countries. Unilateral data regulation by each country addresses the moral-hazard problem associated with opacity, but may nevertheless reduce global welfare due to cross-country externalities that distort output and data usage. The regulations may also cause excessive investment in data localization, even though localization mitigates the externalities. Our findings highlight the need for international coordination - though not necessarily uniformity - on regulations about data usage and protection.

Keywords: Data privacy, regulation, localization, moral hazard

JEL Classification: L15, L86, F12

Suggested Citation

Chen, Yongmin and Hua, Xinyu and Maskus, Keith E., International Protection of Consumer Data (June 2020). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2020/42, Available at SSRN: https://ssrn.com/abstract=3688295 or http://dx.doi.org/10.2139/ssrn.3688295

Yongmin Chen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-8736 (Phone)
303-492-8960 (Fax)

Xinyu Hua

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China

Keith E. Maskus

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-7588 (Phone)
303-492-8960 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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