Piracy and music sales: The effects of an anti-piracy law

•We investigate the effects of a copyright protection reform on illegal file sharing and music sales.•We find that the reform decreased Internet traffic by 16 percent during the subsequent six months.•We find that the reform increased music sales by 36 percent during the subsequent six months.

The implementation of a copyright protection reform in Sweden in April 2009 suddenly increased the risk of being caught and punished for illegal file sharing. This paper investigates the impact of the reform on illegal file sharing and music sales using a difference-in-differences approach with Norway and Finland as control groups. We find that the reform decreased Internet traffic by 16% and increased music sales by 36% during the first six months. Pirated music therefore seems to be a strong substitute to legal music. However, the reform effects disappeared almost completely after six months, likely because of the weak enforcement of the law.