e-Globalization and trade agreements

Abstract

The global success of online search and social media stems from free access and high quality—both enabled by a business model that monetizes personal data through targeted advertising. But does this model yield socially desirable outcomes? We examine how a global monopoly platform chooses privacy protection and service quality. Under a free-service model, it overexploits data and underprovides quality relative to a global planner. Yet, even with distortions on both margins, stronger privacy protection alone can improve global welfare—and may even boost quality. When privacy policy is set nationally, large countries often align with global interests due to a “Brussels Effect,” where platform responses to one country's policy spill over globally. This alignment reduces the need for privacy rules in trade agreements. In contrast, ad tech taxes create “beggar-thy-neighbour” incentives, making them a clear case for international cooperation.