Economic incentives to merge: testimony before the Subcommittee on Select Revenue Measures, Committee on Ways and Means

by James N. Dertouzos, Kenneth E. Thorpe

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Presents key findings of research into the evolving structure of daily newspaper ownership. The industry, once dominated by small, family-owned enterprises, has undergone dramatic changes during the 20th century. In 1910, for example, only 3 percent of all U.S. daily newspapers were members of chains; today about 70 percent are subsidiaries of larger corporations. This research examines the economic causes of this newspaper conglomeration. The authors examine a variety of potential motives to merge: economies of scale, pecuniary advantages stemming from being able to obtain inputs at lower prices, easier adaptation to rapid changes in technology, and tax incentives. No measurable advantages were found in any of these motives save one: tax laws seem to be a primary cause of mergers in the newspaper industry.

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