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Digital Trade, Data Protection and EU Adequacy Decisions

Author

Listed:
  • Bernard Hoekman
  • Martina Ferracane
  • Erik van der Marel van der Marel

Abstract

Using a structural gravity model, we assess whether EU adequacy decisions on data protection areassociated with bilateral digital trade. Controlling for digital-relevant bilateral covariates, includingpreferential trade agreements and other binding data flow arrangements, we find that countriesthat received EU adequacy exhibit an increase in digital trade between 6-14 percent, representinga trade cost reduction up to 9 percent. This is mostly driven by the EU granting adequacy to theU.S., reflecting the dominance of the EU and U.S. in global digital trade. We also find that countriesthat have an EU adequacy determination exhibit greater digital trade among each other, suggestiveof a network or club effect. Complementary country-specific analysis of post-adequacy digital tradeperformance using synthetic control methods confirms the positive effects of adequacy.

Suggested Citation

  • Bernard Hoekman & Martina Ferracane & Erik van der Marel van der Marel, 2023. "Digital Trade, Data Protection and EU Adequacy Decisions," RSCAS Working Papers 2023/37, European University Institute.
    • Handle: RePEc:rsc:rsceui:2023/37
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    References listed on IDEAS

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    Keywords

    Digital trade; data protection; mutual recognition; equivalence; trade costs;
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