NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Austan Goolsbee

NBER Working Paper No. 11994
Issued in February 2006
NBER Program(s):   IO   PR   PE

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.

download in pdf format
   (173 K)

email paper

This paper is available as PDF (173 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11994

Published: 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. citation courtesy of

Users who downloaded this paper also downloaded these:
Greenstein and McDevitt w14758 The Broadband Bonus: Accounting for Broadband Internet's Impact on U.S. GDP
Feldstein w5055 Tax Avoidance and the Deadweight Loss of the Income Tax
Goolsbee w6863 In a World Without Borders: The Impact of Taxes on Internet Commerce
Greenstein and McDevitt w16166 Evidence of a Modest Price Decline in US Broadband Services
Goolsbee and Klenow w11995 Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us