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The impact of newspapers on consumer confidence: does spin bias exist?

  • Alsem, Karel-Jan
  • Brakman, Steven
  • Hoogduin, Lex
  • Kuper, Gerard

    (Groningen University)

Mullainathan and Shleifer (2002) argue that there are two types of media bias. One bias, called ideology, reflects a news outlet's desire to affect reader opinions in a particular direction. The second bias, referred to as spin, reflects the outlet's attempt to simply create a memorable story. Competition between outlets can eliminate the effect of ideological bias, but increases the incentive to spin stories. We examine whether spin exists in Dutch newspaper reporting on the state of the economy. If so, we assume that in their reports on the state of the economy newspapers exaggerate. Consumers reading such reports may be influenced by these reports. As a result consumer confidence may be affected not only by economic fundamentals, but also by the way they are reported. We construct a variable that reflects the way consumers perceive economic news reported in newspapers. We find that this variable indeed has a significant, but small, impact on consumer confidence, which is short-lived.

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File URL: http://irs.ub.rug.nl/ppn/268628270
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Paper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number 200410.

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Date of creation: 2004
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Handle: RePEc:dgr:rugccs:200410
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