Cyber risk reduces entry and output

A calibrated general‑equilibrium model and data show cyber risk creates an inverse‑U between firm size and attack probability, and that introducing cyber risk into the economy reduces firm entry by ~3.6%, aggregate productivity by ~0.6%, and total output by ~1.8%. Policy matters: well‑designed cybersecurity subsidies and minimum standards can increase output, while bailouts can worsen incentives and shrink output. — This reframes cybersecurity as a macroeconomic policy problem — not only a technical or law‑enforcement issue — and implies different fiscal and regulatory responses will have systematically different aggregate effects.