The world bank Policy Research Working Paper No 2620 Institute for economic research Harvard University Institute Research Working paper No 1919 Who owns the media? Simeon D. Diankov World Bank. CEPR Caralee Mcliesh World Bank Tatiana nenova world Bank; Harvard University Andrei shleifer Harvard University; ECGl; NBER This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection at
The World Bank Policy Research Working Paper No. 2620 Institute for Economic Research Harvard University Institute Research Working Paper No. 1919 Who Owns the Media? Simeon D. Djankov World Bank; CEPR Caralee McLiesh World Bank Tatiana Nenova World Bank; Harvard University Andrei Shleifer Harvard University; ECGI; NBER This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection at: http://ssrn.com/abstract=267386
Who owns the media? Simeon Djankov, Caralee McLiesh, Tatiana Nenova, and Andrei Shleifer World Bank, World Bank, World Bank, and harvard University April 19, 2001 I We thank Mei-Ling Lavecchia, Stefka Slavova, and especially Lihong Wang for excellent research assistance, and Tim Besley, Edward Glaeser, Simon Johnson, Lawrence Katz, Philip Keefer, Aart Kraay, Rafael La Porta, Mark Nelson, Russell Pittman, and Andrew Weiss for helpful comments. Roumeen Islam, Director of the World Development Report 2001 provided valuable input at all stages of the project. The collection of the data was organized and financed by the World Development Report 2001: Institutions for Markets
Who Owns the Media? Simeon Djankov, Caralee McLiesh, Tatiana Nenova, and Andrei Shleifer1 World Bank, World Bank, World Bank, and Harvard University April 19, 2001 1 We thank Mei-Ling Lavecchia, Stefka Slavova, and especially Lihong Wang for excellent research assistance, and Tim Besley, Edward Glaeser, Simon Johnson, Lawrence Katz, Philip Keefer, Aart Kraay, Rafael La Porta, Mark Nelson, Russell Pittman, and Andrew Weiss for helpful comments. Roumeen Islam, Director of the World Development Report 2001, provided valuable input at all stages of the project. The collection of the data was organized and financed by the World Development Report 2001: Institutions for Markets
Abstract We examine the patterns of media ownership in 97 countries around the world. We find that almost universally the largest media firms are owned by the government or by private families Government ownership is more pervasive in broadcasting than in the printed media. Government ownership of the media is generally associated with less press freedom, fewer political and economic rights, and, most conspicuously, inferior social outcomes in the areas of education and health. It does not appear that adverse consequences of government ownership of the media are restricted solely to the instances of government monopoly Simeon diankov Caralee McLiesh The World Bank The World Bank 1818H Street NW 1818H Street NW Washington, DC 20433 Washington, DC 20433 Sdiankovl@worldbank. or cmacliesha worldbank. org Tatiana Nenova Andrei Shleifer The World Bank Harvard U 1818H Street NW Department of Economics Washington, DC 20433 Cambridge MA 02138 tnenova(@worldbank. org and nber shleifer(@harvard. edu
Abstract We examine the patterns of media ownership in 97 countries around the world. We find that almost universally the largest media firms are owned by the government or by private families. Government ownership is more pervasive in broadcasting than in the printed media. Government ownership of the media is generally associated with less press freedom, fewer political and economic rights, and, most conspicuously, inferior social outcomes in the areas of education and health. It does not appear that adverse consequences of government ownership of the media are restricted solely to the instances of government monopoly. Simeon Djankov Caralee McLiesh The World Bank The World Bank 1818 H Street, NW 1818 H Street, NW Washington, DC 20433 Washington, DC 20433 Sdjankov@worldbank.org cmacliesh@worldbank.org Tatiana Nenova Andrei Shleifer The World Bank Harvard University 1818 H Street, NW Department of Economics Washington, DC 20433 Cambridge, MA 02138 tnenova@worldbank.org and NBER ashleifer@harvard.edu
L. Introduction In modern economies and societies, the availability of information is central to better decision making by citizens and consumers. In political markets, citizens require information about candidates to make intelligent voting choices. In economic markets, including financial markets, consumers and investors require information to select products and securities. The availability of information is a crucial determinant of the efficiency of political and economic markets(Simons 1948, Stigler 1961, Stiglitz 2000) In most countries, citizens and consumers receive the information they need through the media, including newspapers, television, and radio. The media serve as the intermediaries that collect information and make it available to citizens and consumers. A crucial question, then, how the media should be optimally organized. Should newspapers or television channels be state or privately owned? Should the media industry be organized as a monopoly, or competitively While there is some theoretical discussion of these issues, our empirical knowledge of the possible forms of organization of the media industry, and their consequences for economic and political markets, remains extremely limited Consider some theoretical issues first. A Pigouvian economist, who believes that governments maximize the welfare of consumers, would conclude that information should be provided by a government-owned monopoly. First, information is a public good-once it is supplied to some consumers, it is costly to keep it away from others, even if they had not paid for it. Second, the provision as well as dissemination of information is subject to strong increasing returns: there are significant fixed costs of organizing information gathering and distribution facilities, but once these costs are incurred, the marginal costs of making the information available are relatively low. For both of these independent reasons, a strong welfare-theoretic case for
1 I. Introduction In modern economies and societies, the availability of information is central to better decision making by citizens and consumers. In political markets, citizens require information about candidates to make intelligent voting choices. In economic markets, including financial markets, consumers and investors require information to select products and securities. The availability of information is a crucial determinant of the efficiency of political and economic markets (Simons 1948, Stigler 1961, Stiglitz 2000). In most countries, citizens and consumers receive the information they need through the media, including newspapers, television, and radio. The media serve as the intermediaries that collect information and make it available to citizens and consumers. A crucial question, then, is how the media should be optimally organized. Should newspapers or television channels be state or privately owned? Should the media industry be organized as a monopoly, or competitively? While there is some theoretical discussion of these issues, our empirical knowledge of the possible forms of organization of the media industry, and their consequences for economic and political markets, remains extremely limited. Consider some theoretical issues first. A Pigouvian economist, who believes that governments maximize the welfare of consumers, would conclude that information should be provided by a government-owned monopoly. First, information is a public good – once it is supplied to some consumers, it is costly to keep it away from others, even if they had not paid for it. Second, the provision as well as dissemination of information is subject to strong increasing returns: there are significant fixed costs of organizing information gathering and distribution facilities, but once these costs are incurred, the marginal costs of making the information available are relatively low. For both of these independent reasons, a strong welfare-theoretic case for
organizing the media as a government owned monopoly can be made. Indeed, these arguments were adduced by the management of the newly formed British Broadcasting Corporation (BBC)in support of maintaining a publicly subsidized monopoly on radio and television in Britain( Coase 1950), and subsequently repeated in many developing countries In the case of the media industry, one additional argument animates the advocates of public ownership, namely consumer ignorance. In the extreme form, this argument holds that private owners use the media to serve the governing classes ( Lenin 1925). In the more subtle versie argued for many years by the BBC, state ownership protects the public from exposure to"extreme views. In modern versions, state ownership of at least some media is supposed to expose the oublic to information, such as culture, which might not be otherwise provided by privately owned firms. This"Sesame Street" argument, in addition to the standard industrial organization ones mediates in favor of state ownership of the media in the minds of many observers In contrast, those who believe in less than fully benevolent government are led to a different conclusion. In their view, a government monopoly in the media would distort and manipulate information to entrench the incumbent government, preclude voters and consumers from making informed decisions, and ultimately undermine both democracy and markets. Because private and independent media supply alternative views to the public, they enable voters and consumers to choose among political candidates, commodities, and securities-with less fear of abuse by unscrupulous politicians, producers, and promoters(Sen 1984, 1999, Besley and Burgess 2000). Moreover, competition among media firms assures that voters and consumers obtain, on average, unbiased and accurate information. The role of such private and competitive media is held to be so important for the checks-and-balances system of modern democracy, that they have come to be called"the fourth estate. " A cynical view of a government's motives thus leads to a
2 organizing the media as a government owned monopoly can be made. Indeed, these arguments were adduced by the management of the newly formed British Broadcasting Corporation (BBC) in support of maintaining a publicly subsidized monopoly on radio and television in Britain (Coase 1950), and subsequently repeated in many developing countries. In the case of the media industry, one additional argument animates the advocates of public ownership, namely consumer ignorance. In the extreme form, this argument holds that private owners use the media to serve the governing classes (Lenin 1925). In the more subtle version, argued for many years by the BBC, state ownership protects the public from exposure to “extreme” views. In modern versions, state ownership of at least some media is supposed to expose the public to information, such as culture, which might not be otherwise provided by privately owned firms. This “Sesame Street” argument, in addition to the standard industrial organization ones, mediates in favor of state ownership of the media in the minds of many observers. In contrast, those who believe in less than fully benevolent government are led to a different conclusion. In their view, a government monopoly in the media would distort and manipulate information to entrench the incumbent government, preclude voters and consumers from making informed decisions, and ultimately undermine both democracy and markets. Because private and independent media supply alternative views to the public, they enable voters and consumers to choose among political candidates, commodities, and securities – with less fear of abuse by unscrupulous politicians, producers, and promoters (Sen 1984, 1999, Besley and Burgess 2000). Moreover, competition among media firms assures that voters and consumers obtain, on average, unbiased and accurate information. The role of such private and competitive media is held to be so important for the checks-and-balances system of modern democracy, that they have come to be called “the fourth estate.” A cynical view of a government’s motives thus leads to a