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The Effect of File Sharing on Record Sales: An Empirical Analysis

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  • Felix Oberholzer-Gee
  • Koleman Strumpf
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    Abstract

    For industries ranging from software to pharmaceuticals and entertainment, there is an intense debate about the appropriate level of protection for intellectual property. The Internet provides a natural crucible to assess the implications of reduced protection because it drastically lowers the cost of copying information. In this paper, we analyze whether file sharing has reduced the legal sales of music. While this question is receiving considerable attention in academia, industry, and Congress, we are the first to study the phenomenon employing data on actual downloads of music files. We match an extensive sample of downloads to U.S. sales data for a large number of albums. To establish causality, we instrument for downloads using data on international school holidays. Downloads have an effect on sales that is statistically indistinguishable from zero. Our estimates are inconsistent with claims that file sharing is the primary reason for the decline in music sales during our study period.

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    File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/511995
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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Political Economy.

    Volume (Year): 115 (2007)
    Issue (Month): ()
    Pages: 1-42

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    Handle: RePEc:ucp:jpolec:v:115:y:2007:p:1-42

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    Web page: http://www.journals.uchicago.edu/JPE/

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