Advertising Spending and Media Bias: Evidence from News Coverage of Car Safety Recalls

Abstract

Do news media bias content in favor of advertisers? We examine the relationship between advertising by auto manufacturers in U.S. newspapers and news coverage of car safety recalls. This context allows us to separate the influence of advertisers, who prefer less coverage, from that of readers, who demand more. Consistent with theoretical predictions, we find that newspapers provide less coverage of recalls by their advertisers, especially the more severe ones. Competition for readers from other newspapers mitigates bias, while competition for advertising by online platforms exacerbates it. Finally, we present suggestive evidence that lower coverage increases auto fatalities.

Keywords: Media Bias, Advertising, Newspapers, Car Manufacturers, Safety Recalls

JEL Classification: L10, L82, M21, M37