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The Benefits of Open Data – Evidence from Economic Research

This contribution is by Guo Xu (OKFN Economics and LSE) and the first part of the blog series “Mainstreaming Open Economics”.

Looking back to the Open Knowledge Festival 2012 in September, there’s an impression that openness is everywhere: There are working groups on Open Science and Open Linguistics, topic streams on Gender and Diversity in Openness, and events like Open Prom and Open Sauna: Open Knowledge and Open Data, it seems, is omnipresent.

Looking beyond the Open Knowledge community, however, the situation is very different: In Economics, for example, not many know what “open data”, “open access” or “Open Economics” exactly mean. Indeed, not many even care. A common reaction is: “Yes, it sounds interesting and important, but does it really matter? And why should I care about it?”

In this post, I would like to give some hard evidence on the positive role of opening up information has had in economics, and sketch ideas for how to involve economists – professional or in training – to mainstream ideas of openness. The blog post is divided into three parts: The first part looks at economic research on open data. The second part looks at the impact of open data on economic research. The third part discusses challenges and ways forward.

The real world impacts of open information

Making information accessible to the public can improve public service delivery. In countries where corruption is pervasive, services and funds often do not reach the frontline provider. And even if services do reach the people, the quality of services provided is often shockingly poor: Survey evidence from Bangladesh, Ecuador, India, Peru and Uganda found absence rates as high as 20% and 35% for school teachers and health workers. In many cases, the staff is poorly trained.

Releasing data on service delivery in this case can help reduce corruption and improve public services. In Uganda, researchers provided information to parents by publishing funding data for a random subset of schools in local newspapers. In consequence, corruption decreased significantly, while schooling outcomes improved substantially. Similar evidence in health delivery and redistributive policies suggest that providing information can help the public to discipline public service providers, improving the quality of services.

Information can also expose corrupt politicians: The Federal Government of Brazil, for example, began to select and audit municipalities at random, releasing audit reports to the media. Researchers found that the audit outcomes had a significant impact on the reelection probability of politicians: Those exposed for corruption were punished at the ballots, and the impact was most pronounced in areas where the dissemination of information was favoured by local radio.

A story from fishermen in South India provides another example of how information can improve market efficiency: Studying the adoption of mobile phones in Kerala, researchers have found convincing evidence that access to information through mobile phones helped fishermen sell their catch at the market where the price was highest (and fish most demanded): Instead of sailing to a port and simply hoping for a good price, fishermen were empowered by technology to make informed decisions on how to trade.

Finally, the benefits of transparency are not only restricted to reducing corruption and lowering the cost of information: A comparative study finds that transparency – measured by accuracy and frequency of macroeconomic information released to the public – leads to lower borrowing costs in sovereign bond markets. Open data pays off in many ways – in many different contexts.

These are just a few selective examples on how cutting-edge economic research has identified the benefits of openness in a diverse range of situations. The cases I presented are not based on correlations, but carefully established causal relationships, leaving – at least within the context studied – little doubt that information matters – big time. Perhaps most importantly, these cases have also shown that open data must be understood in a broad sense: These interventions do not take advantage of linked data, do not use CSVs that are shared through Facebook or Twitter – often, these interventions are simple solutions that ultimately help improving the everyday lives of the people.

9 responses to The Benefits of Open Data – Evidence from Economic Research

  1. great article, guo. seems to be a step in the right direction which is about giving people some scientific facts to support reasoning in favor of opening up stuff. maybe a wiki-based literature review would be nice: author, title, (in)dependent variables, type of research, link + pdf (if available) – but that’s just a thought… :)

  2. There’s actually a ton of research into the economic impact of open data.

    A recent Danish research report brings a bunch of those findings together: http://epsiplatform.eu/content/danish-study-psi-policy-impacts-0

    Also take a look at the impact assessment studies done in light of the review of the EU PSI directive on re-use of government data: There’s the Vickery study, bringing together an overview of other existing research, and there’s the POPSIS study taking a look at a) the impact of lowering the cost of data, and making it free, b) the current apps market re-using gov data c) impact of dataportals. See http://epsiplatform.eu/content/making-case-open-data-0

    In general you will find a long list of studies and reports for various sectors and areas of data re-use in the report section of the ePSIplatform: http://epsiplatform.eu/allreports

    Ton Zijlstra, ePSIplatform community steward

  3. Fully agree,

    And it’s not only Open data, but open business models as well that can provide significante contributions http://www.slideshare.net/mobile/IdeasforChange/the-power-of-open-14340762

  4. just adding my two cents here: http://wiki.linkedgov.org/index.php/The_economic_impact_of_open_data

    (and thanks for the blogpost).

    Cheers, Jw.

  5. Just adding two interesting posts here:

    Case Study: How Open data saved Canada $3.2 Billion by David Eaves; and Greater Manchester – Open Data City by Julian Tait.

    Thanks for this post.

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