Tracing Out International Data Flow: The Value of Data and Privacy
88 Pages Posted: 14 Nov 2023 Last revised: 27 Nov 2023
Date Written: August 8, 2022
I measure firms' value of data and consumers' privacy preferences by analyzing the supply and demand-side reactions to the EU’s General Data Protection Regulation (GDPR). While previous research has focused on consumer reactions to privacy regulations, my study also incorporates firm responses. After GDPR limits firms’ access to data, the EU sales share of US data-intensive firms declines by 8%. EU consumers, who can choose to share less data, suffer a 6% deterioration in user experience as measured by app ratings. I develop an equilibrium model to map these empirical findings and structurally estimate the value of data and privacy. Privacy-conscious consumers gain from privacy protection. However, the quantitative model reveals that the digital welfare of other consumers declines because firms also use data to enhance productivity and customize digital products. In aggregate, EU digital welfare declines by 4.05%.
Keywords: Value of Data and Privacy, Multinational Firms, Consumer Privacy Protection, Data Economy
JEL Classification: G30, D12, D22, O34, D62, D18, F20
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