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Global spillovers of taxation in the online advertising market. Theory and evidence from facebook

Author

Listed:
  • Andrea Lassmann

    (JGU - Johannes Gutenberg - Universität Mainz = Johannes Gutenberg University)

  • Federica Liberini

    (QMUL - Queen Mary University of London)

  • Antonio Russo

    (IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris])

  • Angel Cuevas Rumin

    (UC3M - Universidad Carlos III de Madrid [Madrid])

  • Rubén Cuevas

    (UC3M - Universidad Carlos III de Madrid [Madrid])

Abstract

We study the effect of corporate taxes on multinational digital platforms and the global online advertising market. Using a novel dataset of advertising prices and user product preferences from Facebook, jointly with international trade data, we show that an increase in the platform's corporate tax rate in several countries had a sizeable effect on advertising prices therein. Given the platform's two-sided and multinational structure, we also document substantial spillovers in the effects of ad prices across countries. The results are consistent with our theoretical model, which shows that, due to consumers' limited tolerance for ads, the platform reduces the supply of ads to advertisers located in countries where it faces a higher tax rate.

Suggested Citation

  • Andrea Lassmann & Federica Liberini & Antonio Russo & Angel Cuevas Rumin & Rubén Cuevas, 2025. "Global spillovers of taxation in the online advertising market. Theory and evidence from facebook," Post-Print hal-04910755, HAL.
    • Handle: RePEc:hal:journl:hal-04910755
    DOI: 10.1016/j.euroecorev.2024.104935
    as

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