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Nonprofit Tax Exemptions, For-profit Competition and Spillovers to Community Services

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  • Teresa D Harrison
  • Katja Seim

Abstract

We investigate the importance of nonprofit tax exemptions to the structure of local fitness markets and to the nonprofit's decision to complement fitness offerings with youth programming. We estimate an equilibrium model of market structure of nonprofit and for-fitness centres. Our results suggest that the two ownership types serve different customer bases. We predict that a revocation of tax exemptions would lower nonprofit entry by 26%, leaving for-profit entry unaffected. This decline in nonprofit entry derives primarily from fitness facilities that jointly operate a youth programme. Tax exemptions thus aid in both the provision of the primary and auxiliary services.

Suggested Citation

  • Teresa D Harrison & Katja Seim, 2019. "Nonprofit Tax Exemptions, For-profit Competition and Spillovers to Community Services," The Economic Journal, Royal Economic Society, vol. 129(620), pages 1817-1862.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:620:p:1817-1862.
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    File URL: http://hdl.handle.net/10.1111/ecoj.12615
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    Cited by:

    1. Iris Grant & Iris Kesternich & Johannes Van Biesebroeck, 2022. "Entry Decisions And Asymmetric Competition Between Non‐Profit And For‐Profit Homes In The Long‐Term Care Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 631-670, May.
    2. Gayle, Philip & Harrison, Teresa, 2023. "Competition and Strategic Responses to Fundraising in Donative Markets," School of Economics Working Paper Series 2024-9, LeBow College of Business, Drexel University, revised 01 Aug 2024.
    3. Chevalier, Judith A. & Schwartz, Jason L. & Su, Yihua & Williams, Kevin R., 2022. "JUE Insight: Distributional Impacts of Retail Vaccine Availability," Journal of Urban Economics, Elsevier, vol. 127(C).

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