Newspaper Differentiation and Investments in Journalism: The Role of Tax Policy

28 Pages Posted: 22 Sep 2011

See all articles by Hans Jarle Kind

Hans Jarle Kind

Norwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute); NHH Norwegian School of Economics - Department of Economics

Guttorm Schjelderup

NHH Norwegian School of Economics - Department of Business and Management Science

Frank Stähler

University of Tuebingen - Department of Economics; University of Adelaide - School of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: September 22, 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.

Keywords: two-sided markets, ad-valorem taxes

JEL Classification: D400, D430, H210, H220, L130

Suggested Citation

Kind, Hans Jarle and Schjelderup, Guttorm and Stähler, Frank, Newspaper Differentiation and Investments in Journalism: The Role of Tax Policy (September 22, 2011). CESifo Working Paper Series No. 3582, Available at SSRN: https://ssrn.com/abstract=1932070 or http://dx.doi.org/10.2139/ssrn.1932070

Hans Jarle Kind (Contact Author)

Norwegian School of Economics & Business Administration (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 583 890 (Phone)
+47 55 583 901 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
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NHH Norwegian School of Economics - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Guttorm Schjelderup

NHH Norwegian School of Economics - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Frank Stähler

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

HOME PAGE: http://www.frank-staehler.de

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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