This is the message I got from a very interesting paper, titled “Do Data Breach Disclosure Laws Reduce Identity Theft?” (Authors: Sasha Romanosky, Rahul Telang, Alessandro Acquisti), that is going to be presented at the 7th workshop on Economics of Information Security - WEIS 2008, Hanover, HN, June 25-28, 2008.
Based on their current studies, the authors found “no statistically significant effect that laws reduce identity theft, even after considering income, urbanization, strictness of law and interstate commerce”. The full abstract of a draft version of their paper (accessible online) follows:
“Identity theft resulted in corporate and consumer losses of $56 billion dollars in 2005, with about 30% of known identity thefts caused by corporate data breaches. Many US states have responded by adopting data breach disclosure laws that require firms to notify consumers if their personal information has been lost or stolen. While the laws are expected to reduce losses, their full effects have yet to be empirically measured.
We use panel from the US Federal Trade Commission with state and time fixed-effects regression to estimate the impact of data breach disclosure laws on identity theft over the years 2002 to 2006. We find no statistically significant effect that laws reduce identity theft, even after considering income, urbanization, strictness of law and interstate commerce. If the probability of becoming a victim conditional on a data breach is very small, then the law’s maximum effectiveness is inherently limited. Quality of data and the possibility of reporting bias also make proper identification difficult. However, we appreciate that these laws may have other benefits such as reducing a victim’s average losses and improving a firm’s security and operational practices.”
--- NOTE: my original HP blog can be found here ---
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