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Source: Long Chen, et al., “The Data Privacy Paradox and Digital Demand,” NBER Working Paper Series, May 2021.
Commentary: Policymakers seeking to increase data regulation often cite privacy concerns of consumers to justify harsher restrictions on the free flow of data. While greater data sharing allows for more efficient matching of consumer demand with digital services, consumers under this rationale are instead assumed to value privacy above all else. This assumption, however, is unsupported by the empirical findings of four researchers with the National Bureau of Economic Research.
The team surveyed data-privacy preferences in a sample of users for the mobile pay app Alipay and found no relationship between consumers’ preferences for data privacy and the frequency with which they authorized data sharing with third-party programs via Alipay. The study instead found that higher consumer data-privacy concerns were associated with higher demand for digital services. Increasing data regulations will raise the costs of providing data-intensive digital services and in turn lower the available supply of digital services. Policymakers who mistake consumers as innately possessive of data fail to realize that greater data-privacy concern is a byproduct of increasingly demanding digital consumers. Added data regulations will only limit the growth of the digital economy and dissatisfy consumers.