Nonprofit tax exemptions and market structure: The case of fitness centers
AbstractNonprofits are increasingly present in industries with a large for-profit sector, raising questions about their competitive advantage afforded by the nonprofit tax exemption. We estimate an equilibrium model of market structure for recreation/fitness centers to assess whether nonprofit and for-profit firms compete directly for the same customer base. Our results suggest that the two ownership types serve independent markets. Consequently, nonprofits do not meaningfully crowd out for-profit competitors. We find that local property taxes, as a proxy for a firm’s tax burden, significantly affect for-profit entry and that nonprofit entry would fall by 25%, without affecting for-profit entry, if the same property tax liability was imposed.
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Bibliographic InfoPaper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2013-4.
Length: 39 pages
Date of creation: 01 Dec 2013
Date of revision:
entry; nonprofit firms; tax exemptions;
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-01-10 (All new papers)
- NEP-COM-2014-01-10 (Industrial Competition)
- NEP-CSE-2014-01-10 (Economics of Strategic Management)
- NEP-IND-2014-01-10 (Industrial Organization)
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