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

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  • Hans Jarle Kind
  • Guttorm Schjelderup
  • Frank Stähler
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.
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Suggested Citation

  • Hans Jarle Kind & Guttorm Schjelderup & Frank Stähler, 2013. "Newspaper Differentiation and Investments in Journalism: The Role of Tax Policy," Economica, London School of Economics and Political Science, vol. 80(317), pages 131-148, January.
    • Handle: RePEc:bla:econom:v:80:y:2013:i:317:p:131-148
    DOI: 10.1111/j.1468-0335.2012.00938.x
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    Cited by:

    1. Francis Bloch & Gabrielle Demange, 2018. "Taxation and privacy protection on Internet platforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 52-66, February.
    2. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," Discussion Papers 2012/9, Norwegian School of Economics, Department of Business and Management Science.
    3. Armando José Garcia Pires, 2023. "Ad-Valorem Taxes, Prices and Content Diversification in the News Market," Games, MDPI, vol. 14(2), pages 1-28, March.
    4. Paul Belleflamme & Eric Toulemonde, 2016. "Tax Incidence on Competing Two-Sided Platforms: Lucky Break or Double Jeopardy," CESifo Working Paper Series 5882, CESifo.
    5. Francis Bloch & Gabrielle Demange, 2021. "Profit-splitting rules and the taxation of multinational digital platforms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 855-889, August.
    6. Juan Manuel Sánchez-Cartas, 2021. "Intellectual property and taxation of digital platforms," Journal of Economics, Springer, vol. 132(3), pages 197-221, April.
    7. Frank Stähler & Leander Stähler, 2022. "Copyright Protection in the Digital Single Market: Potential Consequences for Content Platform Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(1), pages 73-94, August.
    8. Foros, Øystein & Kind, Hans Jarle & Wyndham, Tim, 2019. "Tax-free digital news?," International Journal of Industrial Organization, Elsevier, vol. 66(C), pages 119-136.
    9. Xing Wan & Javier Cenamor & Geoffrey Parker & Marshall Van Alstyne, 2017. "Unraveling Platform Strategies: A Review from an Organizational Ambidexterity Perspective," Sustainability, MDPI, vol. 9(5), pages 1-18, May.
    10. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2014. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," American Economic Review, American Economic Association, vol. 104(10), pages 3073-3114, October.
    11. Diego d’Andria, 2023. "Effects of an ad valorem Web Tax in a Cournot-Nash market for digital advertising," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 20-42, February.
    12. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    13. Leonardo Madio, 2023. "Content Moderation and Advertising in Social Media Platforms," "Marco Fanno" Working Papers 0297, Dipartimento di Scienze Economiche "Marco Fanno".
    14. Francis Bloch & Gabrielle Demange, 2019. "Profit-Sharing Rules and the Taxation of Multinational Internet Platforms," CESifo Working Paper Series 7818, CESifo.
    15. Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September.
    16. Leonardo Madio & Martin Quinn, 2024. "Content Moderation and Advertising in Social Media Platforms," CESifo Working Paper Series 11169, CESifo.
    17. Frank Stähler & Leander Stähler, 2022. "Copyright Protection in the Digital Single Market," CESifo Working Paper Series 9597, CESifo.

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    More about this item

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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