Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2009/12: Newspaper Differentiation and Investments in Journalism: The Role of Tax Policy

Hans Jarle Kind (), Guttorm Schjelderup () and Frank Stähler ()
Additional contact information
Hans Jarle Kind: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Guttorm Schjelderup: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Frank Stähler: Dept. of Economics and Business Administration , University of Würzburg, Postal: University of Würzburg, Department of Economics and Business Administration, Sanderring 2, 97070 Würzburg, Germany

Abstract: Newspapers are considered to be important providers of information, culture and language, and are taxed at a reduced VAT rate in most countries. This paper shows that such a policy may affect newspaper di¤erentiation and lead to greater media bias. We further show that a reduced-rate VAT scheme may lead to higher newspaper prices and less investment in journalism. These results are obtained by explicitly taking into account the fact that newspapers operate in two sided markets, where they raise revenue both from readers and advertisers.

Keywords: Two-sided markets; ad-valorem taxes

JEL-codes: D40; D43; H21; H22; L13

20 pages, November 11, 2009

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