Effects of Taxes and Subsidies on Media Services

46 Pages Posted: 20 Dec 2014

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); Norwegian School of Economics (NHH) - Department of Economics

Jarle Møen

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

Date Written: December 19, 2014

Abstract

We start out reviewing the justification for press subsidies. The social value of journalism can be larger than what the newspapers are able to extract because of knowledge externalities, public good characteristics of investigative journalism and non‐appropriability of consumer surplus. A free market will then underinvest in journalism. Problems related to economies of scale and scope further imply that the number of newspapers and their circulations may be too small, while advertising can give newspapers too strong incentives to aim for the mass market. According to the media economics literature, a preferential VAT regime provides higher differentiation incentives for existing newspapers, while a tax deduction for editorial expenses is well suited to increase journalistic investments. Micro economic theory further indicates that fixed transfers is the most efficient instrument to reduce entry barriers and avoid newspaper mortality, and that a subsidy per copy sold will increase circulation. We end the article by summarizing empirical evidence on the effects of media support.

Keywords: Media support, Two‐sided markets, VAT exemption, Tax credit, Direct and indirect subsidies

JEL Classification: H20, L82

Suggested Citation

Kind, Hans Jarle and Moen, Jarle, Effects of Taxes and Subsidies on Media Services (December 19, 2014). NHH Dept. of Business and Management Science Discussion Paper No. 2014/44, Available at SSRN: https://ssrn.com/abstract=2540508 or http://dx.doi.org/10.2139/ssrn.2540508

Hans Jarle Kind

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)

Poschinger Str. 5
Munich, DE-81679
Germany

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Jarle Moen (Contact Author)

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

Helleveien 30
Bergen, NO-5045
Norway

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
76
Abstract Views
594
rank
342,446
PlumX Metrics