IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_8149.html
   My bibliography  Save this paper

Global Spillovers of Taxation in the Online Advertising Market. Theory and Evidence from Facebook

Author

Listed:
  • Andrea Lassmann
  • Federica Liberini
  • Antonio Russo
  • Ángel Cuevas
  • Rubén Cuevas

Abstract

We analyze the effect and welfare implications of taxing multinational digital platforms on the global online advertising market. Using a novel dataset on advertising prices and product preferences of users from Facebook in OECD countries, jointly with international trade data, we show that an increase in the platform’s corporate tax rate in some countries had a strong effect on advertising prices therein. The increase spills over to other countries through pre-existing international trade linkages. This result is consistent with our theoretical model, which shows that a digital platform reduces the supply of ads to advertisers from countries where taxation increases.

Suggested Citation

  • Andrea Lassmann & Federica Liberini & Antonio Russo & Ángel Cuevas & Rubén Cuevas, 2020. "Global Spillovers of Taxation in the Online Advertising Market. Theory and Evidence from Facebook," CESifo Working Paper Series 8149, CESifo.
    • Handle: RePEc:ces:ceswps:_8149
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp8149_0.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Elena Argentesi & Lapo Filistrucchi, 2007. "Estimating market power in a two-sided market: The case of newspapers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
    2. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
    3. 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.
    4. Roel Beetsma & Massimo Giuliodori & Franc Klaassen, 2006. "Trade spill-overs of fiscal policy in the European Union: a panel analysis [‘Fiscal policy, profits, and investment’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(48), pages 640-687.
    5. Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January.
    6. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184, National Bureau of Economic Research, Inc.
    7. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
    8. Andre Boik, 2016. "Intermediaries in Two-Sided Markets: An Empirical Analysis of the US Cable Television Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 256-282, February.
    9. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528-583.
    10. Paul Belleflamme & Eric Toulemonde, 2018. "Tax incidence on competing two‐sided platforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 9-21, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David R. Agrawal & William F. Fox, 2021. "Taxing Goods and Services in a Digital Era," National Tax Journal, University of Chicago Press, vol. 74(1), pages 257-301.
    2. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anderson, Simon P. & Peitz, Martin, 2020. "Media see-saws: Winners and losers in platform markets," Journal of Economic Theory, Elsevier, vol. 186(C).
    2. Andre Boik, 2016. "Intermediaries in Two-Sided Markets: An Empirical Analysis of the US Cable Television Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 256-282, February.
    3. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    4. Anna D'Annunzio, 2013. "Vertical Integration in Two-Sided Markets: Exclusive Provision and Program Quality," DIAG Technical Reports 2013-16, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    5. Anna D'Annunzio & Mohammed Mardan & Antonio Russo, 2020. "Multi‐part tariffs and differentiated commodity taxation," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 786-804, September.
    6. 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.
    7. Marco Antonielli & Lapo Filistrucchi, 2011. "Collusion and the political differentiation of newspapers," Working Papers 11-26, NET Institute, revised Nov 2011.
    8. Agustín S. Bénétrix, 2012. "Fiscal Shocks And Real Wages," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 203-220, July.
    9. Affeldt, P. & Argentesi, E. & Filistrucchi, Lapo, 2021. "Estimating Demand with Multi-Homing in Two-Sided Markets," Other publications TiSEM 1317bf39-d02e-4f61-a34f-e, Tilburg University, School of Economics and Management.
    10. 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.
    11. Ivaldi, Marc & Zhang, Jiekai, 2020. "Platform Mergers: Lessons from a Case in the Digital TV Market," CEPR Discussion Papers 14895, C.E.P.R. Discussion Papers.
    12. Wilfred Amaldoss & Jinzhao Du & Woochoel Shin, 2021. "Media Platforms’ Content Provision Strategies and Sources of Profits," Marketing Science, INFORMS, vol. 40(3), pages 527-547, May.
    13. Marc Bourreau & Bernard Caillaud & Romain De Nijs, 2018. "Taxation of a digital monopoly platform," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 40-51, February.
    14. Burguet, Roberto & Caminal, Ramon & Ellman, Matthew, 2015. "In Google we trust?," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 44-55.
    15. Yuqing Zheng & Harry M. Kaiser, 2016. "Submission Demand In Core Economics Journals: A Panel Study," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1319-1338, April.
    16. Patrick Cayseele & Stijn Vanormelingen, 2019. "Merger Analysis in Two-Sided Markets: The Belgian Newspaper Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(3), pages 509-541, May.
    17. Van Cayseele, Patrick & Vanormelingen, Stijn, 2009. "Prices and Network Eects in Two-Sided Markets: the Belgian Newspaper Industry," Working Papers 2009/06, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    18. Behringer, Stefan & Filistrucchi, Lapo, 2015. "Hotelling competition and political differentiation with more than two newspapers," Information Economics and Policy, Elsevier, vol. 30(C), pages 36-49.
    19. Qihong Liu & Daniel Nedelescu & Ji Gu, 2021. "The impact of strategic agents in two-sided markets," Journal of Economics, Springer, vol. 134(3), pages 195-218, December.
    20. Song Lin, 2020. "Two-Sided Price Discrimination by Media Platforms," Marketing Science, INFORMS, vol. 39(2), pages 317-338, March.

    More about this item

    Keywords

    online advertising; multi-sided platforms; tax incidence; product interests; international trade;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_8149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.