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

Kind, Hans Jarle; Schjelderup, Guttorm; Stähler, Frank
Working paper
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URI
http://hdl.handle.net/11250/163372
Date
2011-09
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  • Discussion papers (SAM) [578]
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.
Publisher
Norwegian School of Economics, Department of Economics
Series
Discussion Papers;16/2011

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