Finnish Study on PSI Pricing of Geo Data

Finnish Study on PSI Pricing of Geo Data

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Study says marginal costing and free data benefits SME growth.

Helsinki, 3 October 2011

(by Ton Zijlstra)

A recent Finnish study on the impact of marginal cost pricing of geo-data or making it freely available, in contrast to full cost pricing, has now been published in English. The study is titled Does Marginal Cost Pricing of Public Sector Information Spur Firm Growth.

The abstract of the study reads (emphasis ours):

The firm-level data concerning re-users of geographical information (GI) active in architectural and engineering activities and related technical consultancy sector from 15 countries during the year 2000-2007 suggests that the pricing of public sector GI strongly relates to the firms’ sales growth. Firms functioning in the countries in which public sector agencies provide fundamental geographical information either freely or at maximum marginal costs have grown, on average, about 15 percent more per annum than the firms in the countries in which public sector GI is priced according to the cost-recovery principle. The difference-in-difference estimations further show that positive growth impact materializes already one year after switching to the marginal cost pricing scheme but a stronger boost to the firm growth takes place with a two year lag. Interestingly, marginal cost pricing has not generated notable growth among the large firms; it has been SMEs benefiting most from cheaper geographical information. It seems credible that switching to marginal cost pricing of public sector information (PSI) substantially lowers SMEs’ barriers to enter new market areas in the provision of GI-based products and services.

The full study can be downloaded in PDF from ETLA, the Research Institute of the Finnish Economy, or ordered on paper at a cost of 10 Euro.

Antti Eskola