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GDPR and the Lost Generation of Innovative Apps

Author

Listed:
  • Rebecca Janßen
  • Reinhold Kesler
  • Michael E. Kummer
  • Joel Waldfogel

Abstract

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.

Suggested Citation

  • Rebecca Janßen & Reinhold Kesler & Michael E. Kummer & Joel Waldfogel, 2022. "GDPR and the Lost Generation of Innovative Apps," NBER Working Papers 30028, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30028
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    Cited by:

    1. Ratul Das Chaudhury & Chongwoo Choe, 2023. "Digital Privacy: GDPR and Its Lessons for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(2), pages 204-220, June.
    2. Chen, Wanyi & Wang, Yiying & Wu, Dongjing & Yin, Xingqiang, 2024. "Can the establishment of a personal data protection system promote corporate innovation?," Research Policy, Elsevier, vol. 53(9).
    3. Fredrik Erixon & Oscar Guinea, 2024. "From Compliance to Constraint: How Digital Regulation Impacts Productivity and Innovation in Europe," EconPol Forum, CESifo, vol. 25(06), pages 18-21, November.
    4. Zhong, Chen & Feng, Nan, 2025. "Decent work in the digital era: How enterprise privacy and data rights protection enhance employee well-being," International Review of Economics & Finance, Elsevier, vol. 103(C).
    5. Guy Aridor & Yeon-Koo Che & Brett Hollenbeck & Maximilian Kaiser & Daniel McCarthy, 2024. "Evaluating the Impact of Privacy Regulation on E-Commerce Firms: Evidence from Apple’s App Tracking Transparency," CESifo Working Paper Series 10928, CESifo.
    6. Leyden, Benjamin T., 2025. "Platform design and innovation incentives: Evidence from the product rating system on Apple's App Store," International Journal of Industrial Organization, Elsevier, vol. 99(C).
    7. Chen, Hongze & Li, Conggang & Liu, Jiatao & Xu, Rong, 2025. "Navigating digital frontiers: The impact of China's cybersecurity law on corporate digital innovation," International Review of Financial Analysis, Elsevier, vol. 103(C).
    8. Garrett A. Johnson, 2022. "Economic Research on Privacy Regulation: Lessons from the GDPR and Beyond," NBER Chapters, in: The Economics of Privacy, pages 97-126, National Bureau of Economic Research, Inc.
    9. Shuaicheng Liu, 2024. "Privacy regulation in asymmetric environments," Journal of Regulatory Economics, Springer, vol. 66(2), pages 157-173, December.
    10. Alireza Fallah & Michael I. Jordan & Ali Makhdoumi & Azarakhsh Malekian, 2024. "On Three-Layer Data Markets," Papers 2402.09697, arXiv.org, revised Nov 2025.
    11. repec:ces:ceswps:_10456 is not listed on IDEAS
    12. Carl Benedikt Frey & Giorgio Presidente, 2024. "Privacy regulation and firm performance: Estimating the GDPR effect globally," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1074-1089, July.
    13. Masayuki Morikawa, 2023. "Compliance costs and productivity: an approach from working hours," Journal of Regulatory Economics, Springer, vol. 63(3), pages 117-137, June.

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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