GDPR and the Lost Generation of Innovative Apps
Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half. We estimate a structural model of demand and entry in the app market. Comparing long-run equilibria with and without GDPR, we find that GDPR reduces consumer surplus and aggregate app usage by about a third. Whatever the privacy benefits of GDPR, they come at substantial costs in foregone innovation.
Some of the authors received financial support from the state government of Baden-Wuerttemberg, Germany, through the research program ‘Strengthening Efficiency and Competitiveness in the European Knowledge Economies’ (SEEK). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.