IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Value of Broadband and the Deadweight Loss of Taxing New Technology

Author Info

  • Goolsbee Austan

    ()

    (U. Chicago, GSB)

Abstract

With fixed costs of developing technology, taxes can generate large efficiency costs by slowing the rate of diffusion and these costs are not accounted for in conventional analyses. This paper illustrates the potential importance of this idea in the context of taxes on broadband Internet access at an early stage of its existence by combining data on individual demand by area with data on supplier entry into those markets. Applying a tax to broadband in 1998 would have reduced the quantity and generated a large deadweight loss in the conventional model but when the analysis accounts for the fixed costs of entering new markets, taxes lead to delayed entry in several markets. In these places, the lost consumer surplus is additional deadweight loss and it more than doubles the true efficiency costs from taxation. The conventional model also dramatically understates the share of the tax burden borne by consumers.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.degruyter.com/view/j/bejeap.2005.5.issue-1/bejeap.2006.5.1.1505/bejeap.2006.5.1.1505.xml?format=INT
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 5 (2006)
Issue (Month): 1 (April)
Pages: 1-31

as
in new window

Handle: RePEc:bpj:bejeap:v:contributions.5:y:2006:i:1:n:8
Contact details of provider: Web page: http://www.degruyter.com

Order Information: Web: http://www.degruyter.com/view/j/bejeap

Keywords:

Other versions of this item:

Find related papers by JEL classification:
  • H2 - Public Economics - - Taxation, Subsidies, and Revenue
  • D6 - Microeconomics - - Welfare Economics

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Downes, Tom & Greenstein, Shane, 2002. "Universal access and local internet markets in the US," Research Policy, Elsevier, vol. 31(7), pages 1035-1052, September.
  2. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
  3. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
  4. Timothy F. BRESNAHAN & Peter C.REISS, 1994. "Measuring the Importance of Sunk Costs," Annales d'Economie et de Statistique, ENSAE, issue 34, pages 181-217.
  5. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-94, April.
  6. Jeffrey K. MacKie-Mason & Hal R. Varian, 1994. "Pricing the Internet," Computational Economics 9401002, EconWPA.
  7. Austan Goolsbee & Jonathan Guryan, 2006. "The Impact of Internet Subsidies in Public Schools," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 336-347, May.
  8. Goolsbee, Austan & Klenow, Peter J, 2002. "Evidence on Learning and Network Externalities in the Diffusion of Home Computers," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 317-43, October.
  9. Faulhaber, Gerald R & Hogendorn, Christiaan, 2000. "The Market Structure of Broadband Telecommunications," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 305-29, September.
  10. Jerry Hausman, 1998. "Taxation by Telecommunications Regulation," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 29-48 National Bureau of Economic Research, Inc.
  11. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
  12. Jerry Hausman, 1998. "Taxation by Telecommunications Regulation," Books, American Enterprise Institute, number 53052, 2.
  13. Donald Bruce & John Deskins & William F. Fox, 2004. "Has Internet Access Taxation Affected Internet Use?," Public Finance Review, , vol. 32(2), pages 131-147, March.
  14. Walter Beckert, 2005. "Estimation of Heterogeneous Preferences, with an Application to Demand for Internet Services," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 495-502, August.
  15. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-79, April.
  16. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October.
  17. Austan Goolsbee & Amil Petrin, 2004. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV," Econometrica, Econometric Society, vol. 72(2), pages 351-381, 03.
  18. Jerry A. Hausman, 1997. "Valuing the Effect of Regulation on New Services in Telecommunications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 1-54.
  19. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
Full references (including those not matched with items on IDEAS)

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

as in new window


Cited by:

  1. Pereira, Pedro & Ribeiro, Tiago, 2011. "The impact on broadband access to the Internet of the dual ownership of telephone and cable networks," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 283-293, March.
  2. Gao, Maija & Hyytinen, Ari & Toivanen, Otto, 2005. "Demand for Mobile Internet: Evidence from a Real-World Pricing Experiment," Discussion Papers 964, The Research Institute of the Finnish Economy.
  3. Economides, Nicholas & Tåg, Joacim, 2008. "Network Neutrality on the Internet: A Two-sided Market Analysis," Working Paper Series 727, Research Institute of Industrial Economics, revised 09 Nov 2011.
  4. Degryse, Hans & Ferrari, Stijn & Verboven, Frank, 2007. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," CEPR Discussion Papers 6592, C.E.P.R. Discussion Papers.
  5. Austan Goolsbee, 2001. "The Implications of Electronic Commerce for Fiscal Policy (and Vice Versa)," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 13-23, Winter.
  6. Roberto Burguet & R. Preston McAfee, 2008. "License Prices for Financially Constrained Firms," Working Papers 351, Barcelona Graduate School of Economics.
  7. Mélisande Cardona & Anton Schwarz & B. Yurtoglu & Christine Zulehner, 2009. "Demand estimation and market definition for broadband Internet services," Journal of Regulatory Economics, Springer, vol. 35(1), pages 70-95, February.
  8. Pollock, R., 2009. "The Economics of Public Sector Information," Cambridge Working Papers in Economics 0920, Faculty of Economics, University of Cambridge.
  9. Victor Glass & Stela Stefanova, 2010. "An empirical study of broadband diffusion in rural America," Journal of Regulatory Economics, Springer, vol. 38(1), pages 70-85, August.
  10. Prieger, James E. & Hu, Wei-Min, 2008. "The broadband digital divide and the nexus of race, competition, and quality," Information Economics and Policy, Elsevier, vol. 20(2), pages 150-167, June.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:contributions.5:y:2006:i:1:n:8. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.