Political Economy of Mass Media

Maria Petrova
New Economic School

ESNIE, 4th June 2010

Outline
Two big questions:
1) Is media important?
 Any independent effect on people’s behavior?
 Different counterfactuals:
 Different media…
 …or no media at all

 If media is important, what it is important for?

2) If media is important, what drives media content?
Media effects
Traditional studies
People come to be interested in media effects during
and after WWII
But: early studies did not find any effects
Self-selection to media consumption is the main
problem
“Minimal effects” paradigm
Media reinforce existing beliefs and predispositions
Lazarsfeld, Berelson, and Gaudet 1948; Berelson, B. R., P.
F. Lazarsfeld, and W. N. McPhee 1954; Klapper 1960
Does media matter? Examples
Fox News and 2000 Bush-Gore elections
Russian public television and elections of Unity and
Vladimir Putin in 1999-2000
German radio in 1930s and Nazi support
RTLM radio in Rwanda in 1994 and Tutsi genocide
Television and Mexican pivotal 2000 elections
Methodology
The main problem is self-selection
People choose media which reflect their preferences and
prior beliefs
As a result, effects are either too small, if a study controls
for individual pre-existing preferences, or too large, if a
study does not do it
Need some exogenous variation to identify the effect
Field experiments (e.g. Gerber, Karlan, and Bergan
2009, free 10-week subscription to Washington Post or
Washington Times)
Methodology - 2
Another potential solution: use geography…
Ground conductivity, proportion of woodland (e.g.
Strömberg 2004)
Irregular Terrain Model (ITM) and mountains (e.g.
Olken 2009)
ITM and idiosyncrasy of Soviet times resource allocation
(e.g. Enikolopov et al. 2010)
Elevation (our work in progress in Croatia)
Methodology - 3
… or other source of idiosyncratic variation
Cable industry variables (DellaVigna and Kaplan 2007)
Different overlap between media markets and
Congressional districts (Strömberg and Snyder 2009)
Variation in coverage due to Olympic Games or other
exogenous events (Einesee and Strömberg 2007)
Different distance to the nearest newspaper publishing
information about school grants in Uganda (Reinikka
and Svennson 2004)
Questions
What are the outcomes?
Corruption
Voting behavior
Social capital
Violence
Consumption, investment…
Is the presence of media important?
i.e. compare situations with and without media
Is media content important?
i.e. compare situations with and without a particularly
biased media outlet
Comparison of effects
Persuasion rates (DellaVigna Kaplan 2007, DellaVigna
Gentzkow forthcoming)
How many people are convinced by a media outlet to change
their behavior?
yT  yC 1
f  100 *
eT  eC 1  y0

Here i{T,C},
ei is the share of those receiving the message,
yi is the share of those who adopt behavior of interest,
y0 is share of those who would adopt it without the message
Voting studies
Effect of Fox News on Bush vote share
11.6% (DellaVigna and Kaplan 2007)
Effect of NTV, the national channel independent from the
government, on
vote share of opposition parties in Russia: 7.7%
vote share of pro-government party in Russia: 66% (Enikolopov,
Petrova, Zhuravskaya 2010)
Effect of Washington Post free subscription on Democratic vote share
19.5% (Gerber, Karlan, Bergan 2009)
Effect of unexpected Democratic endorsements on Gore vote
share
6.5% (Knight and Chiang 2009)
Turnout studies
Effects of different GOTV technologies (Gerber and Green 2000):
15.6% persuasion rate for door-to-door canvassing
1.0% persuasion rate of 1-3 mailing cards
Effect of the introduction of television in 50s and 60s (Gentzkow
2006):
4.4% persuasion rate of exposure to television
Effect of newspaper entry in 19th and 20th century U.S. counties
(Gentzkow and Shapiro 2009)
12.9% persuasion rate of access to some local newspaper
Effect of local news in Spanish on turnout of Spanish population
7.6 % effect on individual turnout in midterm elections, 3.5% effect
in presidential elections
Mechanism of persuasion
Rational choice models, with media consumers
not fully discounting information from biased sources (e.g.
Genzkow and Shapiro 2006; Petrova 2008; Gehlbach and Sonin
2009)
Behavioral models, with consumers
underestimating the biases in media content (e.g., Cain et al. 2005;
Eyster and Rabin 2009),
 thinking categorically (Mullainathan 2001; Mullainathan, Schwarzstein,
and Shleifer 2008), or
 double counting repeated information(DeMarzo, Vayanos, and Zwiebel
2003)
More detailed survey in DellaVigna and Gentzkow (forthcoming)
Outside United States…
Convincing evidence of media effects is scarce
Effect of West German television on anti-communism
feelings in Eastern Germany (Hainmueller and Kern 2009)
Effect of RTLM radio on killing of Tutsi in Rwanda (Yanagizawa
2010)
Some studies which do not use field or natural experiments
Lawson and McCann (2005): media effects in Mexican 2000
elections
Ladd and Lenz (2009): Effect of unexpected change in
endorsement pattern of Sun and Daily Star on vote for Labour in
Britain
Reinikka and Svensson (2004): Effect of newspaper coverage of
funding arrangements on school enrollment in Uganda
Overall
Hot topic for empirical research; many gaps in the literature
Media effects in countries other than U.S.
Other democratic countries
Authoritarian states and dictatorship
Historical studies
Media effects in other circumstances
Civil wars
International conflicts
Regime changes
Media effects on other types of behavior
Consumption, investment
Protest behavior
Firm’s strategy
 Example:
media effects in Russia in 1999
Motivation
based on Enikolopov, Petrova, Zhurvaskaya (2010)

Two stories
 In August 1999, Putin, with popularity rating between 1
to 2%, was appointed as prime minister. Eight months
later, he was elected president by getting 52.9% of the
vote.
 In December 1999 Parliamentary elections pro-government
party, Unity, which did not even exist two months prior to the
election, scored the second with 23.8% of the total vote
Mass media seem to play important role
The goal of the paper is to establish causal effect of
media on voting behavior
Identification - 1
Compute predicted availability of NTV, the only national
channel independent from the government in 1999
Use data on location and power of transmitters
Use ITM model (Hufford 2002, Olken 2008) which takes into
account geographic obstacles to signal propagation to predict
signal strength
Use signal strength and survey data to predict NTV availability
Compare subregions with different availability of NTV with
region fixed effects included
Use signal strength as instrument for NTV exposure in
individual-level analysis
Identification - 2
Look at the determinants of availability of NTV transmitters
System of transmitters was inherited from Soviet educational
channel
Transmitters were more likely to be located in large industrial
towns, so 3 basic variables explain their location
Availability of transmitters not correlated with pre-existing
political preferences after these 3 variables are taken into
account
Placebo experiment
In 1995 NTV was not able to use this national system of
transmitters
Check if NTV had any effect on voting in 1995
Results
Effects of predicted NTV availability
+6.3% on vote for opposition parties, positively covered by
NTV
- 8.9% on vote for pro-government party, criticised by NTV
-3.8% on turnout
On individual level, significant effect of NTV even
controlling for voting intentions 1 month before elections
Persuasion rates
7.7% for positive message
65.6% for negative message
Media bias
All the news that fits to print
What drives media slant?
Can we talk about media bias?
Who are the actors?
Media consumers
Media outlets
Potentially, some other group interested in media content
 Government
Special interest groups
 Advertisers

 Journalists
Media bias
Discretion which media outlets have over content
Choice of topics
Choice of experts
Editorials
Endorsements
Reporting/non-reporting valuable information (e.g. the
state of the world)
Assume that some unbiased point is defined…
 Bias can be viewed as deviation from this unbiased point
Some measures
Experts cited by different members of Congress
(Groseclose and Milyo 2005, Gasper 2009)
Language used by different members of Congress
(Gentzkow and Shapiro 2010)
Support of Supreme Court decisions by editorials (Ho
and Quinn 2008)
Recommendations of mutual funds with and without
advertising (Reuter and Zitzewitz 2006)
Empirical evidence
Gentzkow and Shapiro (2010):
 Use a measure of media bias based on phrases used by
Democrats and Republicans in Congress, e.g. “war on terror”
vs “war in Iraq” or “tax cut” vs “tax relief”
 Evidence for demand-side effect, 20% media bias is explained

by political preferences of local population

 No evidence of economically significant supply-side effects

Reuter and Zitzewitz (2005):

 Financial recommendations biased to mutual funds
advertised in newspapers
 No bias for Wall Street Journal
Supply-side explanations
Government
Besley and Prat 2006, Gehlbach and Sonin 2009, Qian and Yanagizawa
2009
Journalists
Baron 2004, Puglisi 2006
Special interest groups
Herman and Chomsky 1988, Dyck et al. 2008, Alston et al. 2010, Petrova
2008
Advertisers
Baldasty 1992, Ellman and Germano 2009
Political parties
Kaplan 2003, Petrova 2010
Examples
CBS and Abu Graib story (2004)
CBS received information
chairman of the Joint Chiefs of Staff personally called CBS anchor
asking to suppress photos and videos
Secret-police chief Montesinos and TV channels in Peru (2000)
Bribes to TV owners were substantially higher than bribes to
judges or members of parliaments
Small cable channel finally exposed bribe videos which facilitated
the change of regime
General Motors and LA Times (2005)
GM cancelled its advertising contract with LA Times after a
negative story about its products was published
Demand-side explanations
Some media consumers want media slanted in particular direction
Coverage consistent with their priors
Confirmatory bias (Rabin and Schrag 1999)
Models of media markets with consumers’ preferences for bias
(Mullainathan and Shleifer 2005) or reputation Gentzkow and Shapiro
2006)
Models with exogenous changes of control in media markets (Durante
Knight 2009)

Lippmann (1922) “a newspaper can flout an advertiser, it can attack

a powerful banking or traction interest, but if it alienates the buying
public, it loses one indispensable asset of its existence”
Effect of competition
Supply-side driven bias: competition helps
Increases incentive of media outlets to please the audience
Increases payment necessary for influencing media (e.g.
Besley and Prat 2009)
Demand-side driven bias: competition does not
necessarily reveals truth
Increases incentives of media outlets to stick to people’s
priors (Gentzkow Shapiro 2006)
Allows consumers to self-segregate more effectively
(Mullainathan Shleifer 2005)
Effect of advertising
Does increasing reliance on advertising revenues reduces
supply-side media bias?
Theoretically, two answers:
Yes (Besley Prat 2006, Gentkow et al. 2006, Gabszewicz et al.
(2001, 2002)
It depends (Gehlbach and Sonin 2009, Petrova 2008)
Anecdotal evidence suggest advertising stimulated
development of independent press in the U.S.
Baldasty, 2002, Smythe 2002, Starr 2004
Empirically , true for American newspapers of 1880s
Petrova 2010
Overall
What determines media bias?
Interesting question, theoretically and empirically
Potential directions for future research:
How supply-side and demand-side interact in a two-
sided market framework?
Media competition and interest group competition with
heterogenous consumers
More empirical evidence for supply-side effects
More empirical evidence for countries other than United
States
Example: how advertising revenues created
an independent press
Argument
based on Petrova (2010)
Higher advertising revenues create incentive for media to
become independent
Theoretical conditions for advertising effect:
Besley and Prat (2006): independent media is always preferred
by the audience
Gehlbach and Sonin (2008): truth is preferred and government
does not want to intervene
Chen and Riordan (2007): market expansion increases variety
Gabszewicz et al. (2001): pooling equilibrium becomes possible
Gentzkow et al. (2006): size of bias does not matter
Necessary to look for empirical evidence
Empirical evidence
Data from unique dataset on independent and partisan
newspapers in U.S. ,1881-1886
Newspapers had political affiliation: Democratic,
Independent, or Republican
Political affiliation implied control by political parties
through printing contracts
through access to political information
through convincing constituency to subscribe
Downside of party control: inability to choose editorial
policy
Data on advertising rates and location of these newspapers
Methodology
Main hypothesis: higher profitability of advertising
makes newspapers more likely to be independent
Fixed effects estimation
county or newspaper fixed effects
Analysis of entry
IV results:
local laws and ordinances
outdoor advertising: strict regulation in some places,
after Niagara Falls story
handbill and newspaper distribution
Results
Positive and significant effect of local profitability of
advertising on newspapers’ independence
2-3% higher probability of being independent after 1
standard deviation change
Changes to independent affiliation more likely
Entries of independent newspapers more likely
Implies within-county growth of advertising rates
explains 32% of the growth of independent
newspapers from 1881 to 1886
Thank you!