Wednesday, March 20, 2013

The Positive “Premium” of Genuine Software: A Macroeconomic Approach

RODRIGUEZ-MONTEMAYOR Eduardo
Read the working paper
INSEAD Working Paper 2013/40/TOM

The amount of software pirated around the world has reached records high. In some emerging countries unlicensed software represents more than 90 percent of all the software available. In this paper we explore whether using pirated software damages national competitiveness. For that purpose, we analyze macroeconomic data of 95 countries (which account for more than 96% of global GDP), including data on the use of genuine and unlicensed software, and we show that a 1% increase in the use of genuine software in the sample of countries is translated into a 0.06% increase in average national production (i.e. GDP). The impact on national production of an increase in the use of unlicensed software, by contrast, is half the magnitude: it is associated, on average, with a 0.03% increase in GDP. This difference in the productivity of both types of software could amount to US$37.9 billion. Since there is a “premium” for employing genuine software, governments must act promptly and encourage the use of genuine software by strengthening property rights and legal frameworks.