Do Privacy Laws Affect the Location Decisions of Internet Firms? Evidence for Privacy Havens

Posted: 15 Mar 2012 Last revised: 9 May 2015

See all articles by Fabrice Rochelandet

Fabrice Rochelandet

Université Sorbonne Nouvelle Paris 3

Silvio H. T. Tai

University of Geneva; Université Paris I Panthéon-Sorbonne - Centre Maison des Sciences Economiques

Date Written: March 14, 2012

Abstract

This paper empirically studies the location decisions of internet firms when they face high legal standards of privacy protection. Many factors might influence them: technological spillovers, lower taxation, and so on. Internet firms can also arbitrate national differences and many of them actually locate their activity in order to escape from national laws they consider over-stringent. In the current stage of development of the internet – the so-called Web 2.0 – the ease of access to personal data proved to be strategic input. So the more a jurisdiction makes collecting and using these data easy, the more attractive the country is, if all other things remain constant. One way for a firm to avoid such legal restrictions is to locate or to expand its business in less privacy protective countries. Our empirical results support this 'no- privacy haven' hypothesis. In particular, we highlight a new privacy paradox according to which the more stringent certain online privacy laws are, the more they induce firms to locate their business in less stringent countries, and finally the weaker actual privacy protection on the internet is.

Keywords: Privacy, Firms’ Location, Internet

JEL Classification: K29, F23, L86

Suggested Citation

Rochelandet, Fabrice and Tai, Silvio H. T., Do Privacy Laws Affect the Location Decisions of Internet Firms? Evidence for Privacy Havens (March 14, 2012). Available at SSRN: https://ssrn.com/abstract=2022160

Fabrice Rochelandet (Contact Author)

Université Sorbonne Nouvelle Paris 3 ( email )

13 rue de Santeuil
Paris, F-75005
France

Silvio H. T. Tai

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Geneva, 1211
Switzerland

HOME PAGE: http://sites.google.com/site/silviotai/

Université Paris I Panthéon-Sorbonne - Centre Maison des Sciences Economiques ( email )

106/112 boulevard de l'Hopital
Paris Cedex 13, 75647
France

HOME PAGE: http://sites.google.com/site/silviotai/

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
1,287
PlumX Metrics