THE MEDIA RENT-SEEKING SOCIETY:

DIFFERENCES IN DEMOCRATIC AND AUTOCRATIC

ENVIRONMENTS
Revised version.
Gerald Hosp

University of Fribourg (Switzerland)

September 2003
Abstract
Attention of the public is scarce and channeled by the mass media. This creates opportunities for
informational rent-seeking. Governments are in a favorable position for grasping media rents as
they can regulate the media. However, the extent of regulation and, thus, the agenda-setting power
are limited by their effects on the mass media credibility. In democratic environments the
government will choose informal ways like collusion with cooperative journalists and formal
measures like ownership of public broadcasters and subsidies pretending to ensure the variety of
opinions. Autocratic governments on the other hand favor more formal and direct forms of
controlling the flow of information. The concept of the media rent leads to the predictions that
government activities affect the credibility of the mass media, that the chief executive's time in
power has an impact on media repression, and that democratic and autocratic countries differ in
their instruments to gain the media rent. Cross-sectional and time-series evidence will be
presented.
Keywords: Institutional Media Economics, Rent Seeking, Comparative Institutional Analysis
Jel-Code: D72, L82

Gerald Hosp is research assistant at the Center of Public Finance at the University of Fribourg/Switzerland.
Center of Public Finance, University of Fribourg, Av. de Beauregard 13, 1700 Fribourg, Switzerland.
Tel.: +41/(0)26/300 82 65, Fax.: +41/(0)26/300 96 78, E-Mail: Gerald.Hosp@unifr.ch.
I would like to thank Ivan Baron Adamovich, Reiner Eichenberger, Heribert Knittlmayer and Mark Schelker
who provided helpful comments and suggestions.
1
1. Introduction
The mass media are the most important sources of information on politics. For a long
time, economic theory has ignored the impact of mass media on markets and politics.
1
Recently, several contributions by Sen (1984), Djankov et al. (2001), Besley and Prat (2001),
Besley and Burgess (2002), Stromberg (2002), Dyck and Zingales (2002) and Mullainathan
and Shleifer (2002) have emphasized the perspective that mass media are institutions which
enable transfers of wealth and influence. Apart from the pure dispersion of information, there
are three channels through which mass media can affect economic and political outcome: (1)
Watchdog activities to disclose non-transparent ways in decision-making. (2) Involvement of
otherwise marginalized groups and special interests. (3) Creation of attention, which leads to
media rents. The latter point is in the focus of this article.
Politicians, interest groups, corporate advertisers and other opinion leaders try to
transmit their messages via mass media. But the ability to disperse information is restricted by
television air time and newspaper space. This creates opportunities for biased information
and, hence, media rents and rent-seeking activities. Especially governments attempt to exploit
the agenda-setting power of the mass media.
Freedom of speech and the press are at the bottom of democracy. Therefore, few people
would be surprised that autocratic governments are more inclined to oppress mass media than
democratic governments. But, the question is, why and how autocrats use media repression?
The economic literature has not yet dealt with the question of different forms of media
repression between different political regimes. In a recent paper Wintrobe (2002b) compares
the efficiency of democracies with autocracies. Human rights guarantee a low-cost procedure
to transfer political power. As it is assumed that in democracies human rights are protected
2
and autocrats use their capacity to repress, Wintrobe (2002b) does not explain different
degrees of media repression. Moreover, many democratic countries experience limitations of
the freedom of speech. State ownership of media is common in many democracies. This paper
introduces the concept of the media rent to explain the differences and similarities of media
policies in democratic and autocratic environments.
Section 2 outlines the literature on autocracy that deals with the comparison of
democracies with autocracies. Part 3 elaborates the concept of a media rent and describes the
extraction of the media rent. Governments face a trade-off between the two determinants of
the media rent: the agenda-setting power and the credibility of the media and the media
system. In section 4 and 5 the democratic and autocratic media policies are described. Part 5
summarizes testable predictions and presents the empirical results. Section 6 points out
limitations and concludes.
2. Comparison of democracies and dictatorships: the contest for power
In the economic literature on autocracy the role of the media has been neglected, with
the exception of Sen (1984) who linked the observation that famines only occur under
dictatorships with the vitality of the media in a country.
2
Mass media are mentioned when the
armory of dictators is described. Along with restrictions on the political and civil rights of
citizens and on opposition parties and groups, the oppression of the media is a tool that
dictators typically use to stay in power (Wintrobe 1998, 2002b). Wintrobe (1990, 1998) has
developed a model to explain the behavior of dictators and points out that the use of
repression creates the so called Dictator's Dilemma: repression leads to less accurate

1
Orr (1987: 79) describes three reasons for the silence of economic analysis: First, individuals are perceived as
rational. Second, prices deliver sufficient information to decision-makers. Third, preferences and technology are
treated as exogenous.
2
Besley and Burgess (2002) show for India that the responsiveness of governments to natural disasters increases
with the competitiveness of the media.
3
information for the dictator about the society he rules. Therefore, he is ignorant of the real
support he has among the population. Consequently, even dictators rely on support of groups
in the society. For generating and maintaining power they use repression and loyalty or
popularity as instruments. A solution for the dilemma is to "overpay" supporters and to
repress the others.
3
Another way of dealing with autocracy is to compare dictatorships with democracies. A
largely empirical literature concentrates on economic growth of dictatorships and democracies
(Przeworski et al. 2000, see for a recent survey Wintrobe 2002a). Olson (1993) and McGuire
and Olson (1996) provide the most prominent theory in regard to comparing political systems.
According to their concept, they differ between stationary and roving bandits. The stationary
bandit, unlike the roving one, has an encompassing interest in preserving the wealth of the
society that he exploits. Because of the superior impact on wealth, dictatorship arises out of
anarchy. As in democracies the interest of majorities are more encompassing than the interests
of the dictator, democracy is superior to dictatorship. Beside the encompassing interest, the
time horizon of democratic and autocratic governments determines the interest in preserving
or raising the wealth of the country. Governments with long time horizons are more favorable
for economic efficiency and growth. The concept of a stationary bandit implies that a raising
time horizon leads to more respect of individual rights. Freedom of speech and press are part
of these rights.
Wintrobe (2002b) focuses more on the conditions of the political competition.
Democracy has the advantage that the transfer of political power takes place at relatively low
costs. It solves the contest for power problem by competitive elections. The barriers to entry
into politics are lower and the opportunities for credible commitments by the government are

3
Wintrobe (1998) defines four types of regimes representing different combinations of repression and loyalty:
tinpots (low repression and loyalty), tyrants (high repression, low loyalty), totalitarians (high levels of both), and
timocrats (low repression, high loyalty). In this paper, the four types are subsumed under the terms dictatorship
or autocracy. Emphasizing the differences between democracies and autocracies, the differentiation between the
these four types does not lie in the focus of the paper.
4
more numerous in democracies than in autocracies (North and Weingast 1989). In addition,
human rights are a prerequisite for a functioning democracy. In autocracies there is no formal
mechanism for the transfer of power. The contest for power ends in revolutions, insurrections,
coups or wars. According to Wintrobe (2002b), autocrats have the capacity to repress
opposition and mass media. Because of the Dictator's dilemma, it is difficult for the autocrat
to assess the efficiency of his policies. If primarily those, who are opposed to and repressed
by the government, have to bear the cost of inefficient policies, these policies can persist even
when they are costly to the regime. Wintrobe (2002b) concludes that democracy is a more
efficient political system than autocracy. For distinguishing between democratic and
autocratic media policy, the concept of the contest for power is too dichotomous. It is
assumed that in democracies human rights are protected and autocrat uses their capacity to
repress. But, state ownership of media and limitations of freedom of speech are common in
many democratic countries. In 1988, the French intelligence service burned 17,000 copies of
an ex-agent's book which was claimed to threaten national security. In Italy the prime minister
Silvio Berlusconi controls the market for commercial television and influences the state
owned television channels. In, at least, authoritarian Belarus, there still exists an independent
press despite a wide range of repressive instruments which the government uses. State owned
newspaper pay less for printing and postal delivery.
4
The independent newspapers have to
submit their articles to an official censor before publication. These examples show that the
classification of political regimes and their media policies is not as straightforward as
proposed.
Nevertheless, the concept of the contest for power is useful in identifying the conditions
of functioning political competition and the impact of human rights on it.
3. Elements of a theory of the media rent

4
Since 1997 Freedom House classifies Belarus as "not free" (twelve points out of fourteen).
5
For explaining the differences and similarities of media policies in democratic and
autocratic environments the concept of the media rent will be used.
5
Mass media are regarded
as an allocative mechanism, aside markets and politics, that permits opportunities to transfer
wealth and influence. In this process two characteristics are important. First, the media rent is
created by the mass media themselves and is due to the impact of mass media on the
allocation of information and attention. Second, governments are able to create economic
rents by cartelizing private producers (Stigler 1971, McChesney 1987).
3.1. The rent-seeking process
At the bottom of the concept of a media rent is the scarcity of attention. Mass media are
able to focus and to create attention. Media workers redistribute attention in their function as
gatekeepers. Because of cognitive limitations, consumers of media content are not fully
informed. More realistic models include costs of information processing and psychological
considerations like cognitive dissonance or thinking in coarse categories (Eichenberger and
Serna 1996, Mullainathan and Shleifer 2002). Moreover, individuals' estimates are affected by
errors due to the processing and assessing costs of information. Caplan (2001) has offered a
model of irrationality on rational grounds which results in systematic errors. If error is cheap,
people will hold irrational beliefs. Eichenberger and Serna (1996) have shown that even under
the assumption of rational expectations unsystematic estimation errors are relevant at the
aggregated social level. As the mass media are an important provider of information, their
opportunities of exhausting information monopolies and of provoking estimation errors are
ample. Furthermore, mass media are coined by large fixed costs. Therefore, media markets
are highly concentrated. Because of important barriers of entry particular media possess

5
The notions democracy and autocracy are understood as two contrasting points on a continuum of political
regimes.
6
spatial or temporary monopolies resulting in discretionary power for the information
gatekeepers.
Limited attention leads to agenda setting. The agenda-setting effects of mass media are
well documented in public opinion research (McCombs 2002). Producers of information, like
politicians, interest groups, companies and anyone who benefits from a favorable public
opinion attempt to obtain the gains and to avoid the losses from an influenced media agenda.
In analogy to the rent-seeking model, media workers are passive brokers among competitive
rent seekers.
6
The fact that certain information is transmitted, and not another, results in at
least short run benefits, the media rent. Unlike to the economic rent, suppliers of information
will be paid in influence, esteem, reputation, popularity or stardom. These non-financial
benefits can be transferred into economic rents or votes. Lott (1999) describes that the
distribution of transfers will be facilitated if mass media are controlled by the government.
The social costs of the media rent-seeking are twofold. First, the deadweight losses arise from
an inefficient allocation of information. The provision of information is distorted. Second, for
the competition of preferential treatment resources are invested to obtain agenda-setting
power or to resist it. High expenses for public relations, spin doctors and media trainer reflect
the attitude of a media rent-seeking society. The competition for rents can result in distortions
on the markets of goods which are used for gaining preferential treatment (Tullock 1967,
Sobel and Garrett 2002).
3.2. Media rent extraction by government: Agenda-setting power and credibility
Governments are in a favorable position in attaining media rents as they can shape the
regulatory framework and eliminate competition on media markets. Moreover, governments
are compared to the opposition attractive for the media because they can provide decisive and
relevant information. Or, they can try to extract private rents by threatening to regulate or
7
deregulate the market (McChesney 1987). Rents can be extracted easier if firms exhibit firm-
specific private investments (Sidak 2002).
In all their actions governments have to cope with the mechanism that determines the
extent of the media rent. The media rent is affected by the capacity to prescribe the agenda
and the credibility of the media and the media system. The agenda setting power depends on
the ability to capture the media and to monopolize sources of attention. The use of these
instruments requires resources. Democratic and autocratic governments face different
constraints to regulate media markets as the concept of contest for power implies. The agenda
setting power can be used to influence the competition between issues ("what to think about")
or the competition within issues ("how to think about it") (McCombs 2002).
The contribution of the agenda setting power to the extent of the media rent is limited
by the perception of the credibility of the mass media. Credibility depends on the type of
regulation and its visibility. Regulation may be more or less visible because the intention may
be unclear, especially if it is linked to public interest, and because some regulations are
addressed to a small part of the population, the media workers. Following the notion of
Freedom House that publishes annually a survey of press freedom, regulation activities will
be distinguished between legal, political and economic measures. Table 1 specifies these
categories and shows their degree of perceptibility. Another impact on credibility has the
situation in which individuals have to make a decision. The credibility of the mass media is
less important if individuals face a low-cost decision. A further influencing factor are
psychological costs which arise if people are confronted with unpleasant news by the media.
Censorship in war times e.g. can dampen the psychological costs of bearing the atrocities of
war. Credibility of media increases if the news fit certain beliefs.
An increase in agenda setting power may take the form of an increase in the range of
activities to eliminate competition on media markets. Ceteris paribus, the risk of getting

6
As the focus of this paper lies in the impact of governments on the media, this assumption simplifies the
8
biased news increases, and the credibility of the mass media will decrease. However, there is
an effect that works in the opposite direction: an increase in agenda setting power brings
along the facilitated prevention of psychological costs. At low levels of agenda setting power
this effect will be small for most individuals. It remains arguable if this effect occurs at high
levels.
Consequently, the more governments try to extract the media rent, the more the
credibility of the media decreases. The benefits of extracting increase with a diminishing
scale. Figure 1 depicts this situation. The maximum of the attainable media rent will be
reached at point M with an corresponding optimal degree of extraction, e*. By increasing
media regulation (or agenda-setting power) beyond this point, media rent will decline. The
shape of the curve is determined by the overall attitude towards media freedom by
governments and citizens, the type of media, the type of regulation and the rule of law. Other
intermediating factors are the size of a country which can constrain the possible number of
media outlets as well as illiteracy rate, openness of a country, linguistic heritage (and possible
access to media outside the country), education and size and number of minorities. Because of
the limited space, these factors cannot be discussed.
4. Democratic media policy
A democratic environment stands for constitutional guarantees of freedom of
expression, which are more or less enforced, and for the competitive elections of
governments. Only exceptions like information externalities are admissible for restrictions of
freedom of expression.
7
Nevertheless, the above mentioned examples indicate that even in
democracies mass media are more regulated than welfare theoretic considerations would
suggest.

concept. Nevertheless, mass media can pursuit economic and ideological aims.
9
In democracies competition between media outlets will be more intensive and market
entry easier than in autocratic countries. Thus, the government will lose some agenda-setting
competence to the media and gain a potentially higher media rent due to increased credibility.
For extracting the media rent, governments will use more invisible instruments like increases
collusion with co-operative journalists and more activities partly pretending to care about the
public interest like subsidies and public broadcasting.
8
Visible and formal measures will be
used less in order to strengthen the credibility of the media system. But, why are governments
interested in increasing credibility? The opposition may gain from credibility too.
Nevertheless, governments are in a favorable position, especially for the competition within
issues. On a market for attention producers will demand attention, if the expected value of the
media rent exceeds the costs of pushing the message into the media. Governments have lower
costs for providing information and possess the more relevant information and more credible
threat of extracting rents than opposition. This relative advantage over the opposition suggests
an incumbency effect.
9
Therefore, government is interested in increasing credibility of media. At the same time
it is in the better position to impose invisible regulations than the opposition. The diverse
mass media are differently vulnerable to rent extraction activities by governments. Compared
to publishing, television exhibits higher levels of fixed costs and more significant economies
of scale. These fixed costs represent sunk costs which make market entry and exit difficult.
Therefore it is far easier to control television than publishing. Media coverage can be better
influenced by "soft" instruments like state ownership, subsidies or licensing, whereas media
which have lower sunk costs, like publishing, are better tamed by repression or criminal law.
Because of welfare-theoretic considerations for public broadcasting, television can, also in a
democratic setting, come under the influence of the state. Nevertheless, state ownership is not

7
Examples for information externalities are violence at television or child pornography.
8
Murschetz (1999) describes various impacts of state support for daily press in different countries.
9
Government could build a cartel with the opposition to prevent new entry into the political market.
10
necessary for protecting the public interest. E.g. Sunstein (1999) has proposed mandatory
public disclosure of information about public interest broadcasting, economic incentives as
"play-or-pay" and voluntary self-regulation by the industry as instruments for fulfilling the
public interest obligation. However, Djankov et al. (2001) could not find any benefits of state
ownership.
The concept of the media rent implies that governments have a comparative advantage
compared to the opposition. Constitutional guarantees cannot prevent these transactions costs
in the contest for power, as governments use discretionary political instruments. If these are
perceptible, credibility will decrease. Therefore, they tend to exploit the media rent by
discreet measures and push credibility by supporting formal freedom of expression. To gain
the media rent democratic governments regulate television more than publishing.
5. Autocratic media policy
Autocratic governments try to control media more than democratic governments.
Nevertheless, they often avoid open repression and use instruments like shortage of paper or
excessive taxation. Even in totalitarian states like the former USSR, people could write letters
to the editor. These are attempts to solve the Dictator's dilemma. But, as the contest for power
is inefficient in autocracies, dictators want above all limit the competition between issues.
They exploit their capacity to set the agenda. This imposes costs on the dissemination of
opposing opinions, and increases the costs of opposition groups organizing and the random
estimation errors of the citizens. The effects of psychological costs and indoctrination are
controversial:
"No one has produced any evidence of brainwashing even after the exposure for
over 50 years to Communist propaganda. So to suggest that these regimes
11
survive through their capacity to indoctrinate does not add much to our
understanding of how these regimes work."
10
Due to the direct influence on the media they will lose credibility but they gain agenda-
setting power. In addition, the increased possibility to create and extract rents in other
industries because of an absent critical press. Thus, perceivable regulations are more common.
If the repressed have to bear the costs of the inefficient policies, these kind of policies can
improve the dictator's probability of survival.
However, rational individuals know that players with an information monopoly attempt to
bias information, especially if the world in the media differs substantially from the self
perceived reality. Citizens will try to de-bias dirty information provided by the government or
change their media use in such a way that entertainment is preferred to information
(Eichenberger and Serna 1996). Thereby, individuals can even overshoot by de-biasing dirty
information. In the former communist countries theatregoers have sometimes seen subversive
messages in the plays of dramatists who were loyal to the regime (Harrison 2001). Thus, for
maintaining a certain level of dirty information in a society, repression of media has to
increase. Spagat (2001) has developed a dynamic model of repressive dictatorships and
concludes similarly that there should be recurring big repression. Therefore, repression
increases with long tenure. In addition to state ownership or dependent editors, more direct
ways like violence, harassment, intimidation and official censorship will be used. Visible
repression will heat up self-censorship too. On the other hand, visible oppression could be a
signal of "good journalism". Journalists who are threatened and harassed seem to be critical
and a menace for the government or interests groups. For example, the radio station B92 had
the reputation to be the last free medium in Yugoslavia until it was closed in 1999. One part
of the reputation arose after the attempts of the government to silence B92. However, the

10
Wintrobe (2001: 37).
12
autocratic government will face a credibility-repression spiral and has to intervene
increasingly.
The problem of the contest for power leads to the requirement that the media agenda has
to be controlled by the dictator. As he wants to assure his survival he is forced to disregard the
credibility of the media. Because of the dynamics of repression, the intensity of repression
does not decrease with the tenure of the regime, contrary to the conclusion of Olson (1993). In
autocracies the whole range of repressive methods are employed. Therefore, state ownership
of the press is common.
6. Empirical results
Based on the foregoing arguments three predictions will be tested. First, the impact of
the government on the credibility of mass media. Second, the importance of the tenure for
media freedom. Third, the different use of instruments in democracies and autocracies.
6.1. Credibility and media repression
The credibility of mass media and the media system, and thus the media rent, depend on
the activities of the government. Repression will diminish the credibility of media.
Questionable is, if visible oppression like harassment and intimidation of journalists leads to
more self-censorship and less trust in media, or if repression will be perceived as a signal for
critical journalism which results in more trust in specific media.
In the following regressions, the share of people by country that tend to trust in
television as an institution is used as a proxy for credibility of mass media. The choice of the
sample is driven by data availability.
11
Because of cross-sectional data, an OLS regression

11
The variable is composed of several surveys with slightly different questions. The results for Central and East
Europe, Latin America, Africa and East Asia can be checked up at www.globalbarometer.org. Survey for the
European Union is provided by Eurobarometer.
13
with robust standard errors can be run. The number of observations is limited to 44 countries.
Therefore the interpretation of the results has to be done with care. Nevertheless, they will
provide a first hint.
The capacity of agenda setting power is measured by the variable media repression. The
variable is taken from the Freedom House's Survey of Press Freedom and ranges from 0 to
100, with higher numbers representing more media oppression. There are three main
dimensions of media oppression considered: legal, political and economic.
In Table 2 the prediction that media repression leads to less credibility will be tested.
The share of people by country that tend to trust in television is the dependent variable.
Controls for population, GDP per capita and regional characteristics are included. Population
is an indicator for the size of media markets. Countries with a sizable population have
potentially more media outlets and more media competition that leads to an increased
credibility. On the other hand, the demand of the population decreases in big countries,
because exit is very unlikely. Migration takes place within the country. The sign of GDP per
capita can be positive, because, with higher incomes, people demand more and better
information. On the other hand, higher income implies more wealth that could by extracted by
biasing information (Lott 1990, 1999).
Indeed, media repression has a negative and statistically significant (at the 10 percent
level) impact on credibility in television. GDP per capita is also negative and statistically
significant. If violence against journalists is included, media repression is negative and
significant.
12
Violence against journalists has a positive and significant impact on trust. This
could be a hint for political oppression as quality signal for media. Like the examples in
former Yugoslavia or Belarus indicate, there are independent media even in very autocratic
countries. But, the reliability of the answers of people in autocratic states has to be
considered.
14
In Table 3 the variable media repression is broken down its dimensions, looking for the
impact of the different measures. The prediction would be that the legal means have little
impact as constitutional guarantees cannot prevent the transactions costs in the contest for
power, as governments use discretionary political instruments.
13
Political and economic means
should have a negative effect on credibility. The regressions in Table 2 casts doubt on the sign
of political means. The results in the first three columns show that only economic means are
perceived as danger for the credibility of media. Political and legal means are positive, but
insignificant. The results are not sensitive to the inclusion of ownership.
In column four, interaction terms between the dimensions of oppression and autocracy
are included. Legal means have no impact on the credibility or trustworthiness of television.
Political means reduce the credibility of television, but in more autocratic countries political
instruments enhance trust. This result supports the prediction that open oppression may be a
signal for vivid and critical press. Economic means are generally positive and insignificant,
whereas in autocratic states they are negative and significant at the 10 percent level.
Economic means in more autocratic states are state ownership, impact of corruption and
bribery on media content, excessive taxation and other economic obstacles like shortage of
paper. This leads often to higher prices for independent media.
6.2. Tenure and media repression
According to Olson (1990), the time horizon of democratic and autocratic governments
determines the interest in preserving or raising the wealth of the country, besides the
encompassing interests. Governments with long time horizons are more favorable for
economic efficiency and growth. The concept of a stationary bandit implies that a raising time
horizon leads to more respect of individual rights (Olson 1996). But, referring to Olson

12
Violence against journalists consists of cases of killed, kidnapped, arrested and expelled journalists (Freedom
House 2000).
13
Unfortunately, I could not, yet, find sufficient data for measuring the rule of law for this sample.
15
(1982), long-term stability is bad for prosperity because it leads to interest groups sclerosis.
Whereas Spagat (2001) and the here proposed concept of a media rent imply that the time in
power and the repression of media are positively linked.
For testing the statements, media repression is regressed on the government chief
executive's time in power. The independent variable is taken from the Database on Political
Institutions (Beck et al. 2001). The Databank for Political Institutions provides another
variable that can be used as an indicator for political stability: tenure of system. If the country
is democratic, the tenure of the system of government is used, otherwise the tenure of the
chief executive (Beck et al. 2001).
The sample consists of the Central and East European countries and the former Soviet
Union. The inspection of this sample has the advantage that some country specific variables
like legal origin are more identical than in a larger sample, nevertheless there is cross-
sectional and time series variation in the questionable variables.
14
To control for other variables that may influence the relationship, I ran fixed effects
regressions. While not all variables are available for the entire study period, many are. As a
baseline model I use a fixed effects model that includes state and year fixed effects.
Therefore, time series and cross-sectional variation in the questioned variables is assumed.
The fixed effects are crucial to dealing with unobservable differences between countries.
Control variables are log of population, GDP per capita at PPP, illiteracy rate, exports
and imports (% of goods and services GDP) and log aircraft departure per capita. The two
latter variables indicate the openness of a country. Log aircraft departure per capita is a proxy
for flow of people and not only goods and services which can influence the available amount

14
The countries used in this sample are Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina,
Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Lithuania,
Macedonia, Moldova, Poland, Romania, Russian Federation, Slovak Republic, Slovenia, Tajikistan,
Turkmenistan, Ukraine, Uzbekistan, Federal Republic of Yugoslavia. The observation period is from 1994 to
2001.
16
of information in a country.
15
The illiteracy rate should rise the benefits from controlling
broadcasting, but makes less necessary to regulate publishing. The openness of a country
brings along a flow of information from abroad. That could undermine the information policy
of the government or heat up oppression of mass media.
The results in Table 4 show that the variables chief executive's year in power and
stability of system have different effects on media freedom. If the chief executive's years in
power rises, media repression increases statistically significant. Whereas the tenure of the
system has a negative impact on media repression. This effect is four times larger than the
former. Due to this results, both views are supported. Long-established systems are favorable
for the freedom of media, as Olson (1990) proposes. But, the chief's executive time in power
affects negatively the ranking of media freedom, as suggested in this paper. Media repression
lies in the individual interest of the chief executive. Therefore, the ruling individual and the
system cannot be regarded as an unity. Dictators and other long-serving politicians are fond of
personality cult that separates them from the regime. Regressions with years in power of the
chief executive's party yield no significant results. Also, constitutional limits on tenure have
no impact.
The weakness of the results lies in the low overall R
2
. Regarding the corresponding
within and between R
2
reveals that especially variation within a country is explained by the
specification.
The regression in column five includes the illiteracy rate. The results show some
deviations from the former columns. This can be explained to some extent by the poor data
availability of the illiteracy rate. Moreover, Albania is an outlier with an average rate of 16%,
whereas the other countries exhibit rates lower than 3%. If Albania is excluded from the
sample and the log of the illiteracy rate is taken, the effects of the important variables get

15
The choice of the controls follows the list of intermediating factors under 3.2. Unfortunately, WDI 2001 does
not provide sufficient panel data for schooling. For this sample, linguistic heritage is of minor interest. As
17
statistically significant at the 5%-level. Nevertheless, for further investigations the impact of
the illiteracy rate has to be considered carefully.
Except for GDP per capita, the control variables show no significant influence. The
negative sign of GPD per capita indicates that a higher income leads to a higher demand for
information.
6.3. Regulation of broadcasting and publishing
Democratic governments tend to exploit the media rent by discreet measures and push
credibility by supporting formal freedom of expression. Thus, to gain the media rent
democratic governments regulate television more than publishing. Compared to publishing,
television is more vulnerable to rent extraction because of higher levels of fixed costs. Media
coverage can be better influenced by discreet and "soft" instruments like state ownership,
subsidies or licensing. In addition to different cost structures, the immediacy and broader
reach of television generate greater control benefits. Respectively, it generates more costs if
television is not controlled.
To test this prediction, the relationship between autocracy (or media oppression) and
state ownership will be regarded.
16
As state ownership is a wide spread and important form of
controlling mass media, it is a good indicator for government's activities. In democracies,
governments may influence mass media by appointing boards and commissions, whereas
authoritarian governments control more directly.
Djankov et al. (2001) find that television has higher levels of state ownership than
newspapers. Especially Western Europe countries exhibit state ownership of broadcasters to a
large extent. Nevertheless, authoritarian countries are more likely to own television and
newspapers.

fractionalization data as indicator for minorities does not exhibit time series variation, a random effects model
has been estimated, but not reported. The results are not much affected by fractionalization.
16
Since the data are cross-sectional, an OLS regression with robust standard errors has been used.
18
The first two columns in Table 5 support these findings. Autocratic states are more
inclined to own newspapers and television stations. State ownership of the press is defined as
the percentage of state-owned newspapers out of the five largest daily newspapers. In
analogy, state ownership of television is the percentage of state-owned television stations out
of the five largest television stations (Djankov et al. 2001). But, the results indicate that
autocratic states are more likely to own newspapers than television stations. The increase of
one point in autocracy brings about 15 percent more state ownership of newspapers, whereas
state ownership of television stations rises only by eight percent. Democratic governments
tend more to gain a media rent by influencing television than newspapers. In contrast to
Djankov et al. (2001) the results suggest that richer countries have higher state ownership.
Until 2000 Freedom House's Survey of Press Freedom provided separate measures of
oppression for broadcasting and publishing. These ratings and interaction terms between
oppression of media and autocracy have been included to the regression. Column 3 shows the
results for state ownership of press. Autocracy remains positive, but gets insignificant.
Oppression of broadcasting and press, as well as the interaction term between autocracy and
oppression of broadcasting are insignificant. The interaction term between press oppression
and autocracy is statistically significant on a 10 percent level and negative, signalling that in
autocratic states oppression of press is a substitute for state ownership. The results for
television in column 4 suggest that the level of oppression of broadcasting has a positive
impact on state ownership, incorporating that ownership is a part of oppression. But the
interaction term with autocracy is negative and significant at the 10 percent level . The
oppression of press has a negative sign, and the sign of the interaction term suggests that
autocratic states with a high level of press oppression also have a high share of state-owned
television, otherwise countries with high press oppression exhibit low state ownership.
Autocratic countries use oppression as a substitute for ownership if the same media are
concerned, whereas the oppression of one kind of media is a good predictor for state
19
ownership of another kind of media. As many democracies have state-owned television
stations, the results implicate that democracies are more inclined to regulate broadcasting than
publishing. In more democratic states, oppression of press is negatively related to state
ownership of television.
7. Limitations and concluding remarks
Before summarizing the conclusions, some limitations that point the way towards
further research are worth noting. First, Freedom House's Survey of Press Freedom differs
between legal, political and economic means. Unfortunately, the distinction between more
visible or hidden instruments and the possibility to link an instrument to public interest is not
made by Freedom Houses survey. Each dimension contains both kinds of means. Therefore,
a clear distinction cannot be made and each country has to be regarded carefully to understand
the kind of media repression.
Second, it is likely that others factors are involved in the process determining the degree
of media repression and the capacity for agenda-setting. Moreover, the impact of the used
control variables is not explored sufficiently.
Third, the different types of political regimes are pooled without taking differences
explicitly into account. Sub-samples may lead to a more differentiated view on the subject.
Nevertheless, the arrangement of political regimes is sometimes ambiguous and can be
affected by changes over time.
Mass media are neglected institutions in economic literature. Because of their immense
impact on markets and politics, a better understanding of their functioning would be desirable.
One channel through which mass media can affect economic and political outcome is their
20
ability to create attention. The redistribution of attention can lead to media rents for
politicians, interest groups, corporations and other opinion makers.
The empirical results suggest that the credibility of mass media depends on the activities
of the government. There are hints that violent oppression of mass media enhances the
credibility of mass media in autocratic states, whereas in more democratic states political
means have a negative impact on trust. Legal means do not show any effect.
The tenure of the chief executive has a negative effect on media freedom, whereas the
stability of a system leads to more media freedom. This holds for all political regimes.
Seemingly, the personality cult exists not only in autocracies.
Autocratic countries use oppression as a substitute for ownership if the same media are
concerned, whereas the oppression of one kind of media is a good predictor for state
ownership of another kind of media. As many democracies have state-owned television
stations, the results implicate that democracies are more inclined to regulate broadcasting than
publishing. In more democratic states, oppression of press is negatively related to state
ownership of television.
21
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25
Appendix
Description of the variables
Variable name Description Source
Media repression
Rating for media oppression. Countries scoring 0 to 30 are
regarded as having a free press; 31 to 60 a partly-free
press; 61 to 100 a not-free press. The level of media
repression in each country is divided into three broad
categories: the legal environment, political influences,
economic pressures.
Survey of Press
Freedom, Freedom
House (various years)
Autocracy rating
Index of political rights. Lower ratings indicate countries
that come closer to the ideals suggested by the checklist
questions of : (1) free and fair elections; (2) those elected
rule; (3) there are competitive parties or other competitive
political groupings; (4) the opposition has an important
role and power; (5) the entities have self-determination or
an extremely high degree of autonomy.
Freedom of the world,
Freedom House
(various years)
Legal means
Rating for the use of legal means. Laws and regulations
that could influence media content as well as the
governments inclination to use these laws to restrict the
ability of media to operate: impact of legal and
constitutional guarantees for freedom of expression, as wll
as the potentially negative aspects of security legislation,
the penal code and other criminal statutes, penalties for
libel and defamation, and registration requirements for
both media outlets and journalists.
Survey of Press
Freedom, Freedom
House (various years)
Political means
Degree of political control over the content of news
media: access to information and sources, editorial
independence, official censorship and self-censorship,
ability of the media to operate freely and without
harassment, and the intimidation of journalists by the state
or other actors.
Survey of Press
Freedom, Freedom
House (various years)
Economic means
Structure of media ownership, the costs of establishing
media outlets as well as of production and distribution, the
selective withholding of state advertising or subsidies,
official bias in licensing, and the impact of corruption and
bribery on content.
Survey of Press
Freedom, Freedom
House (various years)
Repression of
broadcasting
Sub-index for broadcasting.
Survey of Press
Freedom, Freedom
House (2000)
Repression of press Sub-index for press.
Survey of Press
Freedom, Freedom
House (2000)
Trust in television
Percentage of people answering Tend to trust. For
example, question at Eurobarometer is: I would like to
ask you a question about how much trust you have in
certain institutions. For each of the following institutions,
please tell me if you tend to trust it or tend not to trust it.
Slightly different questions at the other surveys. If
necessary, categories have been compressed.
New Europe
Barometer, New
Russia Barometer,
New Democracies
Barometer 2001; East
Asia Barometer 2001-
2002;
LatinoBarometro
1997; Afrobarometer
1999-2001;
Eurobarometer 1999
26
Log of Population Log of total population.
World Development
Indicators 2001 and
2003
GDP per capita GDP per capita and PPP-adjusted
Raiser et al. (2003);
World Development
Indicators 2001 and
2003
Chief executive's year in
office
Years that the chief executive is in office. Beck et al. (2001)
Stability of system
Tenure of system of government if democratic; tenure of
chief executive otherwise.
Beck et al. (2001)
Illiteracy rate
Total adult illiteracy rate (percent of people ages 15 and
above).
World Development
Indicators 2001 and
2003
Exports Exports (percent of goods and services GDP).
World Development
Indicators 2001 and
2003
Imports Imports (percent of goods and services GDP).
World Development
Indicators 2001 and
2003
Log aircraft departures per
capita
World Development
Indicators 2001 and
2003
Ethnic fractionalization
One minus the Herfindahl index on ethnolinguistic group
shares.
Alesina et al. (2002)
Linguistic
fractionalization
One minus the Herfindahl index on linguistic group
shares.
Alesina et al. (2002)
Religious fractionalization One minus the Herfindahl index on religious group shares. Alesina et al. (2002)
Regional dummies
The six regions are Sub-Saharan Africa, Americas, Asia
and Pacific, Middle-East and North Africa, Central and
East Europe, Western Europe.
La Porta et al. (1998)
Legal origin
Dummies for legal origin: english, french, socialist,
german, scandinavian
La Porta et al. (1998)
Press
Percentage state-owned newspapers out of the five largest
daily newspapers (by circulation), 1999.
Djankov et al. (2001)
Television
Percentage state-owned television stations out of the five
largest television stations (by viewership), 1999.
Djankov et al. (2001)
Violence against
journalists
Sum of cases of killed, kidnapped, disappeared, abducted,
arrested and expelled journalists, 1999.
Freedom of the world,
Freedom House
(2000)
27
Figure 1: The degree of control and the media rent
Media
rent
Degree of control e*
M
28
Table 1: Type of regulation
Visible and/or weak link to
public interest
Invisible and/or strong link to
public interest
Legal
Constitutional guarantees for
freedom of expression; laws
protecting the honor of
governmental institutions, officials
and symbols, including criminal
prosecution
Registration requirements for both
media outlets and journalists;
criminal defamation and libel law;
protection of confidential sources
Political Violence against and harassment
and intimidation of journalists;
official censorship and self-
censorship
Access to information and sources;
editorial independence; selective
dissemination of information by
governments
Economic Structure of media ownership
(state and/or private); impact of
corruption and bribery on content
Public Broadcasting; costs of
establishing media outlets,
selective withholding of state
advertising or subsidies; licensing
requirements; taxation
29
Table 2: Credibility and media repression
Dependent variable: Trust in television (% of country)
OLS with robust standard errors
(1) (2)
Media oppression
-0.30
(-1.71)
-0.51
(-2.60)
Violence against
journalists
0.78
(1.72)
Log of population
-2.25
(-0.62)
-2.99
(-0.88)
GDP per capita
-0.98e
-3
(-1.99)
1.05e
-3
(-2.59)
Regional dummies Yes Yes
Constant
114.65
(4.00)
125.03
(4.78)
Number of
observations
44 44
R
2
0.68 0.71
Notes: t-statistics in parentheses. The countries used in this regression are Argentina, Austria, Belgium, Brazil,
Bulgaria, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Ghana, Greece, Hungary, Ireland, Italy, Japan, Korea (South), Lithuania, Malawi, Mali, Mexico, Netherlands,
Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Slovak Republic, Slovenia, South Africa,
Spain, Sweden, Tanzania, Thailand, United Kingdom, Venezuela, Zambia, Zimbabwe. The six regions are Sub-
Saharan Africa, Americas, Asia and Pacific, Middle-East and North Africa, Central and East Europe, Western
Europe.
30
Table 3: Credibility and media repression
Dependent variable: Trust in television (% of country)
OLS with robust standard errors
(1) (2) (3) (4)
Legal means
0.22
(0.32)
0.23
(0.35)
0.24
(0.36)
-0.02
(-0.02)
Legal means *
autocracy rating
-0.01
(-0.05)
Political means
0.15
1.30)
0.12
(0.98)
0.12
(0.89)
-1.26
(-1.75)
Political means *
autocracy rating
0.50
(1.98)
Economic means
-1.45
(-2.34)
-1.43
(-2.25)
-1.40
(-2.17)
0.76
(0.64)
Economic means *
autocracy rating
-1.02
(-1.86)
Autocracy rating
-0.83
(-0.30)
-0.31
(-0.10)
-0.48
(-0.17)
-0.11
(-0.01)
Log of population
-1.59
(-0.43)
-1.57
(-0.42)
-1.49
(-0.39)
2.39
(0.53)
GDP per capita
-0.66e
-3
(-1.01)
-0.64e
-3
(-0.93)
-0.62e
-3
(-0.91)
-0.72e
-3
(-1.10)
State ownership TV
(by count)
-6.48
(-0.51)
Private ownership TV
(by count)
6.01
(0.49)
Regional dummies Yes Yes Yes Yes
Constant
103.82
(3.06)
105.54
(3.02)
98.56
(2.67)
77.07
(1.71)
Number of
observations
44 44 44 44
R
2
0.70 0.70 0.70 0.75
Notes: t-statistics in parentheses. The countries used in this regression are Argentina, Austria, Belgium, Brazil,
Bulgaria, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Ghana, Greece, Hungary, Ireland, Italy, Japan, Korea (South), Lithuania, Malawi, Mali, Mexico, Netherlands,
Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Slovak Republic, Slovenia, South Africa,
Spain, Sweden, Tanzania, Thailand, United Kingdom, Venezuela, Zambia, Zimbabwe. The six regions are Sub-
Saharan Africa, Americas, Asia and Pacific, Middle-East and North Africa, Central and East Europe, Western
Europe.
31
Table 4: Tenure and media repression
Dependent variable: media repression
Fixed effects regression
(1) (2) (3) (4) (5)
Chief executive's year
in power
0.51
(1.75)
0.79
(2.63)
0.54
(1.84)
0.66
(1.66)
Stability of system
-1.93
(-2.76)
-1.77
(-2.41)
-1.90
(-2.75)
-3.33
(-1.81)
Autocracy
3.32
(3.76)
3.73
(4.35)
3.36
(3.87)
2.30
(2.40)
Log of population
-53.72
(-0.97)
-66.79
(-1.23)
-75.09
(-1.28)
-91.49
(-1.65)
-0.99
(-0.01)
GDP per capita
-3.75e
-3
(-3.28)
-3.76e
-3
(-3.24)
-3.83e
-3
(-3.17)
-3.95e
-3
(-3.46)
-6.49e
-3
(-3.45)
Illiteracy rate
6.14
(0.73)
Exports
0.10
(1.24)
0.11
(1.41)
0.11
(1.34)
0.08
(1.04)
Imports
-0.11
(-1.27)
-0.09
(-1.13)
-0.12
(-1.34)
-0.09
(-1.06)
Log Aircraft
departures per capita
-4.44
(-1.54)
-3.76
(-1.32)
-7.52
(-2.66)
-3.84
(-1.36)
Constant
417.65
(1.09)
379.62
(1.38)
578.26
(1.41)
695.12
(1.80)
72.87
(0.10)
Number of
observations
146 144 144 144 99
R
2
within 0.35 0.37 0.30 0.39 0.31
R
2
between 0.11 0.07 0.01 0.03 0.52
R
2
overall 0.09 0.05 0.01 0.01 0.48
Notes: t-statistics in parentheses. All regressions are run from 1994 to 2001 and control for year and state fixed
effects. The countries used in this regression are Albania, Armenia, Azerbaijan, Belarus, Bosnia and
Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Republic,
Latvia, Lithuania, Macedonia, Moldova, Poland, Romania, Russian Federation, Slovak Republic, Slovenia,
Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Federal Republic of Yugoslavia.
32
Table 5: State ownership and media repression
Dependent variable: state ownership of media, by count
OLS with robust standard errors
Press
(1)
Television
(2)
Press
(3)
Television
(4)
Autocracy rating
0.15
(4.11)
0.08
(3.71)
0.25
(1.49)
0.08
(0.90)
Repression of
broadcasting
-0.02
(-0.71)
0.02
(2.14)
Autocracy *
Repression of
broadcasting
0.01
(0.49)
-0.01
(-1.73)
Repression of press
0.06
(1.44)
-0.03
(-2.76)
Autocracy *
Repression of press
-0.01
(-1.85)
0.01
(1.81)
Log of population
-0.17
(-0.76)
-0.03
(-0.44)
-0.19
(-0.69)
-0.02
(-0.33)
GDP per capita
0.22e
-3
(1.80)
0.01e
-3
(0.64)
0.04e
-3
(1.26)
0.01e
-3
(0.49)
Openness Yes Yes Yes Yes
Regional dummies Yes Yes Yes Yes
Legal origin Yes Yes Yes Yes
Fractionalization Yes Yes Yes Yes
Constant
0.98
(0.51)
0.65
(0.84)
0.24
(0.13)
0.73
(1.02)
Number of
observations
82 82 82 82
R
2
0.32 0.23 0.38 0.67
Notes: t-statistics in parentheses. Yes indicates that controls are used. Openness controls are: exports and
imports. The six regions are Sub-Saharan Africa, Americas, Asia and Pacific, Middle-East and North Africa,
Central and East Europe, Western Europe.
Dummies for legal origin: english, french, socialist, german, scandinavian. Fractionalization controls are: ethnic,
language and religion.