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Newspaper Differentiation and Investments in Journalism: The Role of Tax Policy
Author(s) -
Kind Hans Jarle,
Schjelderup Guttorm,
Stähler Frank
Publication year - 2013
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2012.00938.x
Subject(s) - newspaper , journalism , economics , point (geometry) , investment (military) , tax policy , advertising , monetary economics , market economy , public economics , business , tax reform , political science , law , politics , geometry , mathematics
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. 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.