The Value of Broadband and the Deadweight Loss of Taxing New Technology
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 this by analyzing the impact that taxes would have had on broadband Internet access at an early stage of its diffusion around the country, combining data on individual demand by area with data on supplier entry in those markets. Applying a tax to broadband in 1998 would have reduced the quantity and generate a large deadweight loss in the conventional model but when the analysis accounts for the fixed costs of entering new markets, taxes would have also delayed entry in several markets. In these places, the lost consumer surplus from delay is an additional deadweight loss and it more than doubles the estimated efficiency costs of taxation. The conventional model also dramatically understates the share of tax burden that would have been borne by customers.
|Date of creation:||Feb 2006|
|Date of revision:|
|Publication status:||published as Goolsbee Austan, 2006. "The Value of Broadband and the Deadweight Loss of Taxing New Technology," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-31, April.|
|Note:||IO PR PE|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- 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.
- Jerry Hausman, 1998.
"Taxation by Telecommunications Regulation,"
in: Tax Policy and the Economy, Volume 12, pages 29-48
National Bureau of Economic Research, Inc.
- 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.
- Austan Goolsbee & Jonathan Guryan, 2002. "The Impact of Internet Subsidies in Public Schools," NBER Working Papers 9090, National Bureau of Economic Research, Inc.
- Austan Goolsbee & Peter J. Klenow, 1999.
"Evidence on Learning and Network Externalities in the Diffusion of Home Computers,"
NBER Working Papers
7329, National Bureau of Economic Research, Inc.
- 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.
- Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
- 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.
- 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.
- Jerry Hausman, 1998. "Taxation by Telecommunications Regulation," Books, American Enterprise Institute, number 53052, 12.
- repec:adr:anecst:y:1994:i:34:p:07 is not listed on IDEAS
- 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.
- 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.
- Mackie-Mason, J.K. & Varian, H.R., 1993.
"Pricing the Internet,"
20/1993, Oslo University, Department of Economics.
- 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.
- 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.
- repec:adr:anecst:y:1994:i:34 is not listed on IDEAS
- Jerry Hausman, 1997.
"Cellular Telephone, New Products and the CPI,"
NBER Working Papers
5982, National Bureau of Economic Research, Inc.
- Downes, Tom & Greenstein, Shane, 2002. "Universal access and local internet markets in the US," Research Policy, Elsevier, vol. 31(7), pages 1035-1052, September.
- Timothy F. Bresnahan & Peter C. Reiss, 1994. "Measuring the Importance of Sunk Costs," Annals of Economics and Statistics, GENES, issue 34, pages 159-180.
- 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.
- Donald Bruce & John Deskins & William F. Fox, 2004. "Has Internet Access Taxation Affected Internet Use?," Public Finance Review, SAGE Publishing, vol. 32(2), pages 131-147, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11994. 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: ()
If references are entirely missing, you can add them using this form.