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International Protection of Consumer Data

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  • Yongmin Chen
  • Xinyu Hua
  • Keith E. Maskus

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.

Suggested Citation

  • Yongmin Chen & Xinyu Hua & Keith E. Maskus, 2020. "International Protection of Consumer Data," CESifo Working Paper Series 8391, CESifo.
    • Handle: RePEc:ces:ceswps:_8391
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    More about this item

    Keywords

    consumer data; data usage; privacy; multinational firm; regulation; data localization; international coordination;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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