GDPR and the Lost Generation of Innovative Apps

This is a fascinating perspective on the impact of GDPR on innovation. The short version: It’s a real blocker! Unsurprisingly, placing restrictions on data management reduces people’s ability to innovate.

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.