partisan bias in economic news evidence on the agenda setting behavior of u s newspapers abstract we study the agenda setting political behavior of a large sample of u s newspapers during the 1996 2005 period our purpose is to examine the intensity of coverage of economic issues as a function of the underlying economic conditions and the political affiliation of the incumbent president focusing on unemployment inflation the federal budget and the trade deficit we investigate whether there is any significant correlation between the endorsement policy of newspapers and the differential coverage of bad good economic news as a function of the president s political affiliation we find evidence that newspapers with pro democratic endorsement pattern systematically give more coverage to high unemployment when the incumbent president is a republican than when the president is democratic compared to newspapers with pro republican endorsement pattern this result is robust to controlling for the partisanship of readers we find similar but less robust results for the trade deficit we also find some evidence that newspapers cater to the partisan tastes of readers in the coverage of the budget deficit we find no evidence of a partisan bias or at least of a bias that is correlated with the endorsement or reader partisanship for stories on inflation

unemployment rates and political outcomes an incentive for manufacturing a political business cycle in recent years the interdependence of politics and economics has received an increasing amount of attention by both economists and political scientists the explanation for this interest lies in the rediscovery of political economy and may be at least partly due to the recent experiences that governmental advisors have had with simultaneously increasing inflation and unemployment conventional macroeconomic approaches have failed to pin point causes for the stagflation and to provide methods for solving the problem the traditional economic policies may have failed in part because these traditional solutions were simply not plausible in the political environments in which they were proposed it is the intent of a growing body of work to develop macromodels with endogenous political sectors the inference made in this literature is that 1 the economy can be manipulated or affected by a political sector and that 2 there is an incentive for the political sector to manipulate the economy this literature has however just begun to formalize the interaction of the political and economic sectors and empirical work is virtually nonexistent the purpose of this paper is to present some evidence on these two inferences in section 1 the first inference is examined in section ii literature on which the first inference is based is reviewed and evidence on the possible incentive to create such a cycle is presented in section iii concluding remarks are offered

intervention analysis of electoral tax cycle the case of japan this paper analyzed the impact of elections on tax policy in japan using an arima autoregressive integrated moving average intervention analysis from 1953 through 1992 we used discretionary tax revenues which means the changes in tax receipts attributable to changes in the tax code rather than automatic tax revenues due to business cycles in the economy

welfare consequences of the six year presidential term evaluated in the context of a model of the u s economy we evaluate the six year presidential term proposal in the context of a model of the u s economy characterized by a short run but not a long run trade off between inflation and unemployment votes and public welfare are separately conceptualized as functions of inflation and unemployment which are indirectly controlled by the president through manipulation of government spending in a series of simulation experiments the vote maximizing choice of policy instruments led to less we fare loss with six than with four year terms under most conditions ironically vote maximizing was shown to lead not only to short and long term welfare loss but also to long run political disadvantage

dynamic optimization of political popularity in an empirical macroeconomic model we estimate a political popularity function for israel taking account of the effects of institutional and political changes on the structure of the function and then use this function in conjunction with a simple macroeconomic model of the israeli economy to calculate dynamic macroeconomic strategies which would have maximized the political popularity of three previous israeli governments we conclude that the dominant strategy was always to keep unemployment at the natural rate but that this strategy was optimally combined with either rising inflation close to elections for the earlier governments or with near zero inflation throughout the term for later governments

tariffs capital export and immiserizing growth abstract the purpose of this paper is to show how the brecher diaz 1977 and minabe 1974 propositions on the capital inflow from a tariff apply symmetrically to capital outflow that is when the home country continues to import the labor intensive goods while remaining incompletely specialized the capital outflow must reduce the home country s real income this will be so when the net return to home capital is greater than the home value of its marginal product at internal prices but less than the home value of its marginal product at world prices

international factor movements repatriation and welfare abstract this paper analyzes two different ways of allowing foreign capital inflow introducing it into the domestic economy and introducing it into a duty free zone it shows how the ranking of the two policies depends on the production patterns in the duty free zone and the rules of factor income repatriation the result can be used to explain the discrepancy between the rankings of these policies in two recent papers the analysis also shows how the way of repatriating factor income could affect the equilibrium of factor movement the welfare of the factor owners and the welfare of the countries concerned

political business cycles 40 years after nordhaus the aim of this article is to survey the huge literature that has emerged in the last four decades following nordhaus s rev econ stud 42 2 169 190 1975 publication on political business cycles pbcs i first propose some developments in history of thought to examine the context in which this ground breaking contribution saw the light of the day i also present a simplified version of nordhaus s model to highlight his key results i detail some early critiques of this model and the fields of investigations to which they gave birth i then focus on the institutional context and examine its influence on pbcs the actual research agenda finally i derive some paths for future research

an essay on the rationality of economic policy the test case of the electional cycle the literature on electional cycles is discussed in the light of the empirical findings by in particular the author two basically different types of explanations of such cycles are compared explanations based on the maximizing behavior of governments aiming at re election explanations building on the insufficiently controlled pressures of events in a democracy it is demonstrated that even when the most well known theory under the nordhaus macraemodel is a rather fragile construction a more robust argument termed the popularity investment argument can be constructed yielding the same basic result from the empirical literature it is concluded that almost the opposite pattern actually occurs in the data it is finally demonstrated that the weak but significant empirical pattern is easy to explain by the elections generate promises which give most real expansion in the second governmental year and most inflation in the third year an average behavior which hardly implies even medium term maximization by governments as assumed under

what moves policy sentiment in spite of the fact that political eras in the united states are widely and often ambiguously defined in terms of a general policy sentiment or mood political scientists have done little in the way of rigorous analysis regarding this subject i argue that shifts in domestic policy sentiment along a liberal conservative continuum may be understood in part as responses to changing economic expectations specifically expectations of a strong economy result in greater support for liberal domestic policies whereas anticipation of declining economic conditions pushes the national policy mood to the right using quarterly data for the period 1968 88 i present a multiple time series error correction model that lends considerable support to the hypothesis

the political viability of rule based monetary policy we have estimated two models explaining political support for the president as a function of economic performance one model reflects the assumption characterizing most of the literature that voters indiscriminately punish inflation and unemployment without regard to the tradeoffs between them the other represents a more demanding conception of voter sophistication about macroeconomic possibilities and about control of the money supply while the data do not unambiguously designate a best model of behavior the sophisticated voter hypothesis performs as well as the naive voter hypothesis in the context of our study clearly this result is subject to the usual econometric caveats including possible misspecification of the model multicollinearity among independent variables etc however there is no particular reason to believe that these problems should favor one model as opposed to the other thus while we cannot conclude that voters really think in terms of rates of growth of velocity and natural output we can question the conventional wisdom that consistent rule based monetary policies may not be politically viable

electoral cycles and budgetary growth in veterans benefit programs while many studies have generated negative findings regarding the general existence of electoral cycles in economic phenomena we have found an apparently robust electoral cycle in veterans benefits this pattern was found between 1961 and 1978 but has disappeared since then we use this case to investigate the possibility that electoral cycles might contribute to the growth of government spending using two different methods of inference we find no strong basis to conclude that such cycles cause increasing public sector growth

persistent media bias abstract the news media plays an essential role in society but surveys indicate that the public views the media as biased this paper presents a theory of media bias that originates with private information obtained by journalists through their investigations and persists despite profit maximizing news organizations and rivalry from other news organizations bias has two effects on the demand for news first rational individuals are more skeptical of potentially biased news and thus rely less on it in their decision making this skepticism reduces demand and leads the news organization to set a lower price for its publication the greater is the bias it tolerates lower quality news thus commands a lower price second bias makes certain stories more likely than others given their private information journalists may bias their stories if their career prospects can be advanced by being published on the front page news organizations can control bias by restricting the discretion allowed to journalists but granting discretion and tolerating bias can increase profits if it allows journalists to be hired at a lower wage bias is not driven from the market by a rival news organization nor by a news organization with an opposing bias and the profits of a high bias news organization can be higher than the profits of a low bias one moreover bias can be greater with competition than with a monopoly news organization if individuals collectively choose regulation in place of their individual decision making bias increases the expected stringency of regulation

does there exist a political business cycle a box tiao analysis theories of the political business cycle are by now common they range from the elegant theoretical work of nordhaus 1975 to the essentially empirical work of tufte 1978 they all assume that politicians manipulate the economy to aid their reelection efforts in particular politicians manipulate macroeconomic policy to create a boom just before election day golden and poterba 1980 provide an excellent review of this literature both tufte and nordhaus provide casual evidence for the existence of a political business cycle using inflation and unemployment rates as indicators of macroeconomic outcomes tufte and nordhaus predict at a minimum that unemployment should be decreasing before election day if presidents are really manipulating the economy very well then unemployment should be at a minimum in the october before the election and hence should be rising after the election in the nordhaus version the economy pays for the pre election boom with a post election surge in the inflation rate nordhaus also suggests that the president should engineer a recession early in his term to reduce inflationary expectations tufte 1978 20 presents graphs of the unemployment series and claims that visual examination shows them to be generally consistent with the hypothesis however he provides no statistical tests of the hypothesis nor does he estimate the quantitative impact of elections on unemployment tufte does not examine the inflation series nordhaus restricts himself to comparing unemployment rates in the two years preceeding and following an election with a simple nonparametric test supporting the hypothesis the literature provides several good empirical tests of the political business cycle hypothesis both paldam 1979 and mccallum 1978 test for the existence of four year cycles and find none however they do not test for discontinuous changes in the series around election day golden and poterba examine whether the use of policy instruments changes near election day and

capital and technology movements and economic welfare economists have long valued capital mobility as an aid to international efficiency robert mundell has shown that under certain conditions the capital movement induced by tariffs on goods will substitute for trade and enable the tariff impeded international economy to reach essentially the same equilibrium as would a completely free international economy it will also except possibly for the case when the optimal tariff is non zero benefit both countries but if perfect unlimited capital mobility is a good thing for the borrowing country it does not follow as this paper demonstrates that any limited amount of capital mobility however small is a good thing if the capital movement is due to discrepancies in returns due solely to a tariff then a small amount of capital inflow will actually diminish welfare in the recipient country thus countries which take a few cautious steps toward liberalization of capital flow may find their welfare diminished this conclusion is related to the intuitive notion that perhaps it might not be a good idea to allow only a few foreign investors to reap high rates of return in capital short countries if foreign investment is allowed enough should be allowed to depress the rate of return so that excessive profits are not taken otut of the country by a few privileged investors on the other hand however this paper shows that if differences in returns are due to a technological advantage in the capital importing country so that the country with initially high return to capital nonetheless exports the capital intensive good and if these differences in returns are accompanied but not caused by tariffs then even short hesitant steps toward liberalization of capital inflow will improve the borrowing country s welfare this paper also shows that the home country s welfare may be improved or diminished by importing the advanced country s technology when the home country levies a tariff and pays royalties for the technology the critical point is that a movement of technology may either increase or diminish economic welfare depending on whether the technological progress is of the capital saving type or of the labor saving type in the fixed production coefficients case in the same case when the technological progress is hicksian neutral technology inflow will reduce or have no effect on the home country s economic welfare depending on whether the foreign country s technological progress occurs in the home country s inmport competing or export industries similarly capital or technology inflow will never increase the borrowing country s welfare when the country specializes completely in a single industry some of these results should be modified when we treat the possibility that changes in factor prices alter factor proportions

welfare gains from capital inflows under import quotas abstract the presence of tariffs was assumed in the literature which examined the effect of additional foreign investment on the welfare of the host country in the small country setting however this paper analyzes the case of import quotas and shows that additional inflows of foreign capital improve the host country s welfare when import quotas are kept constant

the political process and the use of debt financing by state governments empirical evidence offered in this study suggests that decisions by state government officials to effect debt financed spending depend in part on the state s gubernatorial election cycle more specifically the results reveal relative increases in state debt issues in anticipation of elections and furthermore they reveal that such increases are more significant for states characterized by high interparty political competition while theoretical limitations preclude a definitive explanation for these results the evidence is consistent with a view of state political markets where incumbent parties manipulate public policy so as to enhance the probability of success in pending elections this insight is significant in that it suggests a relationship between public policy decisions and election cycles in a context heretofore unexplored

a new view of political accountability for economic performance most political support models imply that in evaluating economic performance voters use a standard that would provide poor predictions of the future and leave the economy vulnerable to manipulation by vote hungry politicians drawing on macroeconomic theory we develop a simple standard of evaluation which encompasses a concern not only for current economic outcomes but also for accurately assessed future consequences of current policies we find that political support for the president can be explained as well by models that assume that voters use this sophisticated standard as by models that assume voter naivete our analysis questions the wisdom of measures typically used to assess voter evaluation of economic performance in a variety of theoretical contexts the results also help to explain the absence of convincing evidence that governments exploit voter ignorance in manipulating the economy

a public and private choice model of broadcasting this paper has established a framework for the analysis of program diversity and audience shares under different regimes of ownership regulation and channel quality the model is one of comparative statics and lends itself to analytical solutions it can serve as a tool to clarify programming decision making and the impact of various institutional arrangements the audience maximization of commercial broadcasting leads to program quality similar to that of a direct democratic process to create a bias towards quality alternative mechanisms had to be introduced that together with the potential for the propaganda use of broadcasting and the potentially large rents of controlling a scarce channel made questions of broadcast policy extraordinarily hard fought especially in european countries however the emergence of alternative distribution channels and payment mechanisms has moved television programs much more into the mainstream of economic transactions in consequence the need to use the political arena to assure the supply of certain programs has declined the marginal losses to incumbent channels has successively decreased and the propaganda reach has been reduced by the spread of programs over the distribution therefore liberalization is less resisted because the stakes have become lower

social preferences inflation unemployment and political business cycles econometric evidence for the reagan presidency it is now common for theoretical analyses of macroeconomic policy to assume that the public s social preferences between inflation and unemployment may be represented by an indifference map that is concave to the origin and most assume that the functional form is quadratic we estimate such a quadratic social preference function we proxy public satisfaction by the public s rating of presidential performance using gallup poll data 2 such data have been widely used by both economists and political scientists in analyses of the economic and non economic determinants of presidential popularity 3 as we have found 33 that over the period 1953 to 1988 there have been structural shifts in the relationship between presidential popularity and inflation and unemployment we limit our analysis to only one presidency the reagan administration

business cycles and the political process the interrelationship between the political sector and the macroeconomy in democratic societies has been examined extensively in recent years research in this area has generally been concerned with two issues first following the lead of kramer 16 various authors have examined the impact of economic conditions on congressional 1 13 21 24 and presidential elections 4 5 the results at the congressional level have been mixed but it is reasonably safe to conclude that economic conditions do affect presidential elections the second issue and the one of primary concern in this study has dealt with the development of models of politico economic interaction the basic concept in these models is that an administration s popularity and therefore the probability of staying in power depends critically on economic conditions knowing this the administration seeks to manipulate the economy in order to maintain power the use of economic tools for political goals by governments is well established in the literature theoretical contributions by nordhaus 20 and macrae 18 have demonstrated the potential for a politically motivated business cycle in a world of politico economic interaction empirical support for the existence of such a cycle is provided by the work of frey and schneider 7 8 9 the main purpose of this paper is to develop a theoretical model of the political business cycle that generates empirically testable proposition the goal is to integrate the theoretical conclusions of a formal model similar to the nordhaus 20 and macrae 18 framework with the empirical support provided by frey and schneider 7 8 9 the possibility of a political business cycle is important for several reasons in macroeconometric models government policy that is endogenous to the system is usually treated as if it were exogenous this may cause serious misspecification errors further forecasts of the future course of economic events which depend heavily on government action will be inaccurate unless the political motivations of governments are considered

presidential popularity and the economy abstract this study tests the hypothesis that the sensitivity of the president s popularity to economic events differs across distinct demographic groups assuming that presidental popularity is negatively related to both the unemployment rate and the inflation rate the electorate is disaggregated according to sex age race education income and political affiliation and separate regressions are estimated for the individual subgroups using quarterly data covering 1976 through 1988 statistically significant differences in the marginal effects of unemployment and inflation on presidential approval are discovered for the various subgroupings

tariffs capital export and immiserizing growth this note attempts to prove that tariff induced capital export will not cause immiserizing growth if exporters of capital earn abroad an amount equal to the value of domestic marginal product of capital at world prices irrespective of the repatriated profit being transferred in terms of home exportables or home importables

electoral and welfare consequences of political manipulation of the economy abstract this paper examines the long term electoral and welfare consequences of repeated strategies whereby a political office holder induces cycles in economic variables to maximize his chances of re election unlike other studies of political business cycles we focus on questions of the desirability of these cyclical patterns and on the long run properties of these political economic models noting that the welfare costs of vote maximizing in a single term extend beyond that term we examine in detail the properties of the long run equilibrium path to which such cycles converge if the economy starts above this path vote maximizing can lead to increased social welfare and vote margins however if the economy starts below this path vote maximizing in the present can cause reduced votes and electocal defeat in subsequent terms this possibility should lead a far sighted enlightened politician or political party to eschew vote maximizing tactics and the political business cycles which accompany them and thus canhelp explain why empirical studies have not found convincing evidence of the existence of such cycles this paper also quantifies the dependence of this long run equilibrium path on the important political and economic parameters of the model

rationality and the political business cycle the case of local government the empirical results which have been reported support the hypotheses implied by the model of rational political behavior set out in section 2 in pre election periods local government development expenditures deviate significantly from their normal levels the extent of deviation is approximately 20

tariffs capital export and immiserizing growth a reply it would be wrong to infer from yeong her yeh 1983 that one can exclude the possibility of immiserization from capital export if exporters of capital earn abroad an amount equal to the value of marginal product of capital at world prices immiserization may occur both in the capital exporting and importing countries when the amount of capital transfer is limited

unanticipated money and the political business cycle six different series of one period forecasts for money growth are generated for each year 1960 through 1984 the prediction errors are analyzed to see whet herthe authorities attempted to expand the economy in election years by unexpectedly raising money growth while there is no evidence of attempts to fool the public throughout the entire 1960 84 period such fooling may have been tried through 1974 it is speculated that the public discussion of expectations formation and of politicians motivations since then may have signaled officials that further attempts to mislead the public would be prohibitively costly copyright 1986 by ohio state university press

the electoral budget cycle this article begins with a review of the now substantial literature on the thesis that polticians manipulate governmental outputs so as to favor their chances of reelection it concludes that while this electoral cycle thesis was initially overstated by its proponents it retains more plausibility than recent critics have allowed this conclusion is then demonstrated through an analysis of expenditures by the ten provincial governments in canada between 1951 and 1984

the welfare impact of tariff induced international capital movement in contrast to the literature that deals with specific repatriation rule in this note the general condition under which tariff induced capital inflow outflow will increase reduce the welfare of a small tariff ridden economy is investigated the derivation is simple and the results obtained embrace all repatriation rules

when can a news organization lead public opinion ideology versus market forces in decisions to make news do news organizations purposefullylead the public to support a particularideological agenda when debating thisquestion many analysts draw conclusionsfrom weak empirical evidence we introducea model that clarifies how a newsorganization s internal structure combineswith market forces to affect when it canlead public opinion we identify conditionsunder which liberal reporters orpolitically driven media magnates canachieve ideological goals we alsoilluminate important barriers that preventmany would be public opinion leaders fromever satisfying these conditions we showthat internal structure and market forcesare critical determinants of any newsorganization s power over public opinion

the market for news we investigate the market for news under two assumptions that readers hold beliefs which they like to see confirmed and that newspapers can slant stories toward these beliefs we show that on the topics where readers share common beliefs one should not expect accuracy even from competitive media competition results in lower prices but common slanting toward reader biases on topics where reader beliefs diverge such as politically divisive issues however newspapers segment the market and slant toward extreme positions yet in the aggregate a reader with access to all news sources could get an unbiased perspective generally speaking reader heterogeneity is more important for accuracy in media than competition per se

good news and bad news evidence of media bias in unemployment reports this study employs information obtained from media content analyses as well as economic and political data to investigate negativity in unemployment news between 2001 and 2010 in germany the data indicate a substantial bias in terms of the amounts of negative and positive reports compared with the actual development of unemployment moreover the media tend to place negative unemployment reports more prominently than positive ones the estimates suggest that the bias is not the consequence of journalists asymmetrically interpreting the official unemployment numbers instead it is associated with the exploitation of often non economic information and structural influences in the process of news production

the congress and fiscal policy although the common belief is that the congress has paid little attention to fiscal policy the same kinds of political economic models which have been used to explain presidential budgetary policy may be used equally well to explain congressional budgetary behavior the congress fiscal policy appears to be systematically sensitive to both economic and political factors changes in the unemployment rate have a major impact on congressional budgetary policy as for political factors the president s lead is followed most closely on revenue proposals and not at all on the expenditure side the electoral cycle in particular the off year congressional election year is also important inducing larger deficits and smaller increases in revenues

reporting for sale the market for news coverage this paper proposes a formal model of the market for political news under reasonable market conditions and when the audience has psychological biases it may be profitable for outlets to differentiate their coverage moreover the implications of the model speak to a deeper impact of political polarization of the electorate

money and politics in a small open economy a time series analysis indicates monetary growth and the gallup poll in canada are systematically related at electoral cycle periodicities 5 to 20 quarters under flexible exchange rates and demonstrates the absence of an electoral component in canadian monetary growth under fixed rates these results confirm empirically a widely accepted extension of the mundell fleming argument that monetary policy is effective only under flexible rates which to my knowledge has not before been directly investigated international constraints on the small open economy under fixed rates lead to the abandonment of monetary policy as an active instrument in electoral politics