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

Andrea Lassmann, Federica Liberini, Antonio Russo, Angel Cuevas Rumin () and Rubén Cuevas
Additional contact information
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]

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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.

Keywords: Online advertising; Two-sided platforms; Corporate taxes; Pass-through; International trade; Gravity (search for similar items in EconPapers)
Date: 2025-02
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Published in European Economic Review, 2025, 172, pp.104935. ⟨10.1016/j.euroecorev.2024.104935⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04910755

DOI: 10.1016/j.euroecorev.2024.104935

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