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Effective Regulation and Firm Compliance: The Case of German Privacy Policies

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  • Jacopo Gambato
  • Bernhard Ganglmair
  • Julia K. Krämer

Abstract

This chapter explores the interaction between the enforcement of and compliance with difficult-to-enforce rules in the context of data regulation. We focus on the effect of the introduction of the GDPR and its transparency principle on the readability of privacy policies for a large sample of German firms. Germany has a system of state-level data protection authorities. These data regulators enforce the same rules but face diverse funding situations, allowing for an ideal setting to study the role of a regulator's capacity in firms' compliance decisions. We find that while, on average, the GDPR lead to less readable policies, firms active in industries that have in the past received more regulatory scrutiny and those active in jurisdictions of better-funded data regulators exhibit a stronger compliance with the GDPR's readability requirement. These results exemplify a more general interaction between regulators' enforcement activity and firms' regulatory compliance.

Suggested Citation

  • Jacopo Gambato & Bernhard Ganglmair & Julia K. Krämer, 2024. "Effective Regulation and Firm Compliance: The Case of German Privacy Policies," NBER Working Papers 32913, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32913
    Note: IO LE PE
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    1. Ganglmair, Bernhard & Krämer, Julia & Gambato, Jacopo, 2024. "Regulatory compliance with limited enforceability: Evidence from privacy policies," ZEW Discussion Papers 24-012, ZEW - Leibniz Centre for European Economic Research.
    2. Christian Peukert & Stefan Bechtold & Michail Batikas & Tobias Kretschmer, 2022. "Regulatory Spillovers and Data Governance: Evidence from the GDPR," Marketing Science, INFORMS, vol. 41(4), pages 746-768, July.
    3. Laffont,Jean-Jacques, 2005. "Regulation and Development," Cambridge Books, Cambridge University Press, number 9780521549486, January.
    4. repec:cup:cbooks:9780521840187 is not listed on IDEAS
    5. Bocong Yuan & Jiannan Li, 2019. "The Policy Effect of the General Data Protection Regulation (GDPR) on the Digital Public Health Sector in the European Union: An Empirical Investigation," IJERPH, MDPI, vol. 16(6), pages 1-15, March.
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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