Nonprofit tax exemptions and market structure: The case of fitness centers

Teresa Harrison and Katja Seim ()
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Katja Seim: Department of Business & Public Policy Wharton School University of Pennsylvania

No 2013-4, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: Nonprofits 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.

Keywords: entry; nonprofit firms; tax exemptions (search for similar items in EconPapers)
JEL-codes: H25 L10 L30 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2013-12-01
New Economics Papers: this item is included in nep-com, nep-cse and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2013_004

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