Newspaper Groups

Economies of Scale, Tax Laws, and Merger Incentives

by James N. Dertouzos, Kenneth E. Thorpe

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This report examines the economic causes of newspaper conglomeration. Once dominated by small, family-owned enterprises, today about 70 percent of all newspaper firms are subsidiaries of larger corporations. Using data obtained by a mail survey of newspaper firms, Sec. II provides a series of empirical tests of the existence of scale economies associated with conglomeration. Section III examines the structure of newspaper input prices. The diffusion of technology in the newspaper industry is the focus of Sec. IV. Section V evaluates the tax motivations for merger and provides an indirect test of their magnitude. Appendix A discusses the changing structure of the newspaper industry; App. B describes the survey of firms and data tabulations; and App. C gives reduced-form descriptions of newspaper operations.

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