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Newspaper Differentiation and Investments in Journalism: The Role of Tax PolicyHans Jarle KindNorwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Norwegian School of Economics (NHH) - Department of Economics Guttorm SchjelderupNorwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Frank StählerUniversity of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Adelaide - School of Economics September 9, 2011 NHH Dept. of Economics Discussion Paper No. 16/2011 Abstract: 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 working papers seriesDate posted: October 10, 2011Suggested CitationContact Information
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