The Impact of Newspapers on Consumer Confidence: Does Spin Bias Exist?

25 Pages Posted: 28 Nov 2004

See all articles by Steven Brakman

Steven Brakman

University of Groningen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Karel-Jan Alsem

University of Groningen - Faculty of Economics and Business

Lex Hoogduin

Bank of the Netherlands

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business

Date Written: November 2004

Abstract

It is sometimes argued that news reports in the media suffer from biased reporting. 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 we find some evidence of spin in Dutch newspaper reporting on the state of the economy. If newspapers are indeed able to create memorable stories this should, according to our hypothesis, affect the opinion of readers with respect to the state of the economy. Sentiments about the actual state of the economy could be magnified by spin. As a result, consumer confidence - a variable that routinely measures the opinion on the state of the economy - can be expected to be affected not only by economic fundamentals, but also by the way these fundamentals 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 impact on consumer confidence, which is short-lived.

JEL Classification: E20, E21, E30

Suggested Citation

Brakman, Steven and Alsem, Karel-Jan and Hoogduin, Lex and Kuper, Gerard H., The Impact of Newspapers on Consumer Confidence: Does Spin Bias Exist? (November 2004). CESifo Working Paper Series No. 1328. Available at SSRN: https://ssrn.com/abstract=625922

Steven Brakman (Contact Author)

University of Groningen - Department of Economics ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
+31 50 363 3746 (Phone)
+31 50 363 3730 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Karel-Jan Alsem

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Lex Hoogduin

Bank of the Netherlands ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Gerard H. Kuper

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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