Working Paper: CEPR ID: DP9192
Authors: Guido Friebel; Matthias Heinz
Abstract: We establish the existence of strong media slant against foreign owners. Using a unique data set from nation-wide distributed quality newspapers in Germany, we find that a foreign firm that downsizes in Germany receives almost twice as much attention than a domestic firm. This quantitative slant is accompanied by qualitative slant; newspapers report in a more negative way about downsizing foreign than domestic firms. The slant is present in all quality newspapers, but it increases from right to left in the political spectrum. This is consistent with theory papers arguing that slant is an equilibrium phenomenon. The slant we document is a clean measure for economic xenophobia; however, not geared against migrants, but against foreign owners. The slant can be a substantial obstacle to FDI, as illustrated by case studies. Our results are likely to be a lower bound estimate, because Germans are rather globalization-friendly and we are looking at quality papers, not tabloids.
Keywords: Economic Xenophobia; Foreign Direct Investment; Globalization; Media Economics; Multinational Enterprises
JEL Codes: L10; L33; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Foreign firms downsizing in Germany (F23) | Media attention received by foreign firms (F23) |
| Negative media coverage of foreign firms (F23) | Market share of foreign firms (F23) |
| Downsizing events for domestic firms (L25) | Media scrutiny of domestic firms (F23) |
| Media slant against foreign firms (F23) | Obstacles to foreign direct investment (FDI) (F23) |
| Political orientation of newspapers (D72) | Intensity of media slant against foreign ownership (F23) |
| Negative media attention towards foreign firms (F23) | Potential penalties from domestic consumers (D18) |