IDEAS home Printed from
   My bibliography  Save this paper

Do privacy laws affect the location decisions of internet firms? evidence for privacy havens


  • ROCHELANDET, Fabrice
  • TAI, Silvio H.T.


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.

Suggested Citation

  • ROCHELANDET, Fabrice & TAI, Silvio H.T., 2012. "Do privacy laws affect the location decisions of internet firms? evidence for privacy havens," MPRA Paper 37354, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37354

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Paulo Guimarães & Octávio Figueirdo & Douglas Woodward, 2003. "A Tractable Approach to the Firm Location Decision Problem," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 201-204, February.
    2. Grossman, Gene M. & Helpman, Elhanan & Szeidl, Adam, 2006. "Optimal integration strategies for the multinational firm," Journal of International Economics, Elsevier, vol. 70(1), pages 216-238, September.
    3. Lise Tole & Gary Koop, 2011. "Do environmental regulations affect the location decisions of multinational gold mining firms?," Journal of Economic Geography, Oxford University Press, vol. 11(1), pages 151-177, January.
    4. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, January.
    5. Avi Goldfarb & Catherine E. Tucker, 2011. "Privacy Regulation and Online Advertising," Management Science, INFORMS, vol. 57(1), pages 57-71, January.
    6. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, July.
    7. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August.
    8. Anthony Venables, 2001. "Geography and International Inequalities: The Impact of New Technologies," Journal of Industry, Competition and Trade, Springer, vol. 1(2), pages 135-159, June.
    9. Michael P. Keane & Susan E. Feinberg, 2006. "Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs," American Economic Review, American Economic Association, vol. 96(5), pages 1515-1558, December.
    10. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
    11. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    12. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    13. George J. Stigler, 1980. "An Introduction to Privacy in Economics and Politics," University of Chicago - George G. Stigler Center for Study of Economy and State 10, Chicago - Center for Study of Economy and State.
    14. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    15. Benjamin Hermalin & Michael Katz, 2006. "Privacy, property rights and efficiency: The economics of privacy as secrecy," Quantitative Marketing and Economics (QME), Springer, vol. 4(3), pages 209-239, September.
    16. Thierry Mayer & Jean-Louis Mucchielli, 1999. "La localisation à l'étranger des entreprises multinationales. Une approche d'économie géographique hiérarchisée appliquée aux entreprise japonaises en Europe," Économie et Statistique, Programme National Persée, vol. 326(1), pages 159-176.
    17. Young Jun Choi & Chung Suk Suh, 2005. "The death of physical distance: An economic analysis of the emergence of electronic marketplaces," Papers in Regional Science, Wiley Blackwell, vol. 84(4), pages 597-614, November.
    18. Posner, Richard A, 1981. "The Economics of Privacy," American Economic Review, American Economic Association, vol. 71(2), pages 405-409, May.
    19. Henisz, Witold J, 2000. "The Institutional Environment for Multinational Investment," Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 334-364, October.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Privacy; Firms’ Location; Internet;

    JEL classification:

    • K29 - Law and Economics - - Regulation and Business Law - - - Other
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:37354. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.