Determinants of the Music Piracy Divide

Why has physical piracy of music grown globally in recent years despite international efforts to reduce the problem? This research employs cross-country time series data analysis to examine physical music piracy rates across developed and developing economies. We provide 1999-2004 cross-country evidence from 70 countries that mean global music piracy rates grew over this period, and observe different mean rates for OECD and non-OECD countries. We examine the effect of per capita income, legal enforcement and technology on piracy rates in the developed and developing economies and choose a fixed-effects model. Our model indicates that variations in piracy of CDs and digital music on CD-Rs among all countries are largely due to growing Internet subscriptions. For non-OECD countries, the model suggests that the increase in Internet use coupled with poor copyrights enforcement has worsened piracy. For OECD countries, however, the growth in Internet subscriptions has not had a significant effect on piracy rates. This article is available in Undergraduate Economic Review: http://digitalcommons.iwu.edu/uer/vol3/iss1/5 1 Undergraduate Economic Review A publication of Illinois Wesleyan University Vol. III – 2006 2007 Title “Determinants of the Music Piracy Divide” Author Valentina Assenova Affiliation The Wharton School, University of Pennsylvania Abstract Why has physical piracy of music grown globally in recent years despite international efforts to reduce the problem? This research employs crosscountry time series data analysis to examine physical music piracy rates across developed and developing economies. We provide 1999-2004 cross-country evidence from 70 countries that mean global music piracy rates grew over this period, and observe different mean rates for OECD and non-OECD countries. We examine the effect of per capita income, legal enforcement and technology on piracy rates in the developed and developing economies and choose a fixed-effects model. Our model indicates that variations in piracy of CDs and digital music on CD-Rs among all countries are largely due to growing Internet subscriptions. For non-OECD countries, the model suggests that the increase in Internet use coupled with poor copyrights enforcement has worsened piracy. For OECD countries, however, the growth in Internet subscriptions has not had a significant effect on piracy rates.Why has physical piracy of music grown globally in recent years despite international efforts to reduce the problem? This research employs crosscountry time series data analysis to examine physical music piracy rates across developed and developing economies. We provide 1999-2004 cross-country evidence from 70 countries that mean global music piracy rates grew over this period, and observe different mean rates for OECD and non-OECD countries. We examine the effect of per capita income, legal enforcement and technology on piracy rates in the developed and developing economies and choose a fixed-effects model. Our model indicates that variations in piracy of CDs and digital music on CD-Rs among all countries are largely due to growing Internet subscriptions. For non-OECD countries, the model suggests that the increase in Internet use coupled with poor copyrights enforcement has worsened piracy. For OECD countries, however, the growth in Internet subscriptions has not had a significant effect on piracy rates. 1 Assenova: Determinants of the Music Piracy Divide Published by Digital Commons @ IWU, 2007 2 Determinants of the Music Piracy Divide Valentina Assenova The Wharton School, University of Pennsylvania