Perception of Digital Risks: Evidence from 54 Countries

While the digital economy has contributed substantially to productivity growth and the emergence of new forms of civic discourse and connectivity, it has also exposed consumers and businesses to various risks associated with use of digital technologies. A chorus of global policy elites regularly sounds the alarm about the growing magnitude of these risks and the urgent need for businesses and governments to respond. And yet, despite the drumbeat of warnings, policy elites regularly express deep dissatisfaction with the status quo. What explains this apparent discrepancy between elite’s demands for more cyber resilience and their political systems’ apparent failure to deliver that resilience? We believe that part of the answer may have to do with the perceptions of digital risks by ordinary individuals. Researchers who have examined cyber risk from an economic perspective have emphasized how information asymmetries and especially externalities contribute to underinvestment in cybersecurity. Our findings in this study add an additional dimension to this work: consumers underestimate risk even when the distribution of costs affects them more directly, as is the case with fraud.