Penalties for Unauthorized Disclosure and Data Privacy

The literature on data privacy often ignores the value of penalties in strengthening data protection while allowing data to safely be shared for research purposes. This note explains why significant penalties and effective enforcement for unauthorized disclosures of confidential data should be an essential complement to privacy-preserving technologies and data access rules. Evidence from tax evasion strongly suggests that penalties and high probability of detection produce nearly perfect compliance with tax rules. Disclosure penalties could significantly reduce the likelihood of an unauthorized disclosure and allow more information to be released without increasing the overall privacy risk.