Newspaper Differentiation and Investments in Journalism: The Role of Tax Policy
Hans Jarle Kind
Norwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute); Norwegian School of Economics (NHH) - Department of Economics
Norwegian School of Economics (NHH) - Department of Business and Management Science
University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); University of Adelaide - School of Economics
September 9, 2011
NHH Dept. of Economics Discussion Paper No. 16/2011
Many countries levy reduced-rate indirect taxes on newspapers, with proclaimed policy goals of stimulating investment in journalism and ensuring low newspaper prices. However, by taking into account the fact that the media industry operates in two-sided markets, we find the paradoxical result that the consequences of a low-tax regime might be quite the opposite; low investments and high prices. We also show that the low-tax regime tends to increase newspaper differentiation. If the advertising market is relatively small, the newspapers might invest too little in journalism and be too differentiated from a social point of view. In this case a tax increase will be welfare-enhancing.
Number of Pages in PDF File: 29
Keywords: Two-sided markets, ad-valorem taxes
JEL Classification: D4, D43, H21, H22, L13
Date posted: October 10, 2011
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