A simple model of copyright levies: implications for harmonization

Copyright levies are used as a way of compensating rightholders for the private use made of their protected works. This paper builds a simple model of copyright levies and investigates welfare implications of the harmonization of levy rates. The result is that, when the policy-maker places sufficient weight on the interests of collecting societies, harmonization could reduce social welfare. When countries are asymmetric, the country with a larger proportion of foreign consumption and more inefficient tax system loses more from harmonization. A calibration exercise using European data shows that harmonization would increase aggregate social welfare. However, in some countries, policy-makers are worse off although consumers are better off with harmonization. Especially, when larger countries have higher decision weights, the policy-makers are worse off overall, and hence would not agree to harmonize the levy rates.