With Alessandro Olper*
Mass media plays a crucial role in distribution of information and in shaping public policy. Theory shows that information provided by mass media reflects its incentives to provide news to different groups in a society and in turn shape these groups’ influence on policy making.
Media coverage affects the efficiency with which politicians reach different groups with their campaign promises. If a political party makes a spending related promise to a group of voters that receive less news coverage, then only a fraction of these voters who would benefit from the spending become aware of the promise. Therefore, a spending promise to this group will not win many votes for the party. Consequently, this group of voters will also not attract many favorable policies. However, if the party were to make similar promises to a group that attracts substantial media coverage (for example, because they are large audiences or because the groups are more valuable to advertisers), then this will lead to a stronger voter response and policies that are more favorable to this group. David Stromberg refers to this outcome as “mass media-competition-induced political bias.”
What does this mean for agricultural policy? The most important stylized fact about agricultural policy is the so-called development paradox, the policy switch from the taxation to the subsidization of agriculture associated with economic development. Several factors drive this pattern. Economic growth is typically associated with a growing urban-rural income gap, inducing farmers who lobby the government to reduce the income gap. They become increasingly successful in their lobbying efforts when a country becomes rich because the number of farmers goes down, which in turn reduces the per-capita on taxpayers or consumers. Agricultural interests, compared to that of consumers and taxpayers, also become more effective in collective action, because the number of farmers declines, agribusinesses develop, and the cost of communication and transportation goes down.
Mass media has an impact on the relationship between agricultural policy and economic development. One key prediction of this model is that government transfers to agricultural interests are generally biased towards larger groups as a result of media competition. Because the agricultural group (the number of farmers) is relatively larger in poor countries and relatively smaller in richer ones, an important implication of the model, ceteris paribus, is that the effect of media competition on agricultural policy differs in poor versus rich countries. In particular, mass media competition reduces agricultural protection in rich (developed) countries, and increases agricultural protection (or reduce taxation) in poor (developing) countries.
The model also predicts that the government transfers will be biased toward groups more attractive to advertisers. As rich people have more money to spend this would imply that the expected “advertiser-value effect” of media competition on agricultural protection would be as follows: small in (very) poor countries, because rural and urban incomes (excluding government transfers) are similar and, negative in rich and emerging countries, where urban incomes are much higher than rural incomes (excluding government transfers). There may be an inverse U-effect with income gaps largest in emerging countries. This effect can be reinforced by an uneven spread of mass media (eg TV) between urban and rural areas. There would be a relatively small gap in very poor countries (as TV distribution in both urban and rural areas is very low) and a rise in urban TV distribution relative to rural TV distribution when countries grow, with the gap in TV distribution narrowing again at high income levels.
Together, these effects imply that the total media effect will:
• increase agricultural protection (or reduce agricultural taxation) in poor countries owing to the group size effect,
• reduce agricultural protection in emerging countries owing to the advertiser value effect and,
• strongly reduce agricultural protection in rich countries owing to the reinforcement of group size and advertiser value effects.
This results in the hypotheses that (a) given the changing role of the agricultural sector due to economic development, the impact of mass media competition on agricultural policy will differ between poor and rich countries, ceteris paribus, and (b) this effect is contrary to the so-called development paradox of agricultural policies. Thus, the traditional change in agricultural policy from taxation to subsidization associated with economic development will be leveled in the presence of mass media competition. We hypothesize that this is due to a combination of the group size effect with larger groups being more attractive to the media, and the advertiser value effect, with richer groups being more attractive audiences for the media.
To empirically test these predictions we use a new dataset from the World Bank on taxation and subsidization of farmers and food consumers from 69 countries since 1960. Our analysis looks at both cross-country and time-series variation in the data.
Our empirical results are consistent with the theoretical hypotheses that public support for agriculture is affected by the mass media. In particular, an increase in media penetration is correlated with a reduction in agricultural taxation in poor countries and a reduction in agricultural subsidies in rich countries. These results are robust to the use of different indicators of agricultural policies, different media variables, different control variables and estimation techniques.
The paper’s findings also contribute to a growing body of evidence suggesting that free and independent media are key to efficient public policies. Previous studies suggest that a more informed and politically active electorate increases the incentives for a government to be responsive and that the mass media reduces the power of special interest lobbies related to unorganized interests. Our results are consistent with the argument that an increase in media (television) diffusion is associated with policies that benefit the majority to a greater extent (i.e. a reduction in taxation of farmers in poor countries and a reduction in the subsidization of farmers in rich countries) and, that increased competition in commercial media contributes to more efficient public policies by reducing transfers to special interest groups.
*Alessandro Olper is an associate professor at the University of Milano, Italy and a Research Fellow at LICOS, KU Leuven.