Working Paper: NBER ID: w31436
Authors: Minji Bang; Lucie Lheude; Andrew Postlewaite; Holger Sieg
Abstract: Using a new comprehensive survey of adults in large U.S. media markets we show that minority and low-skill individuals, who are heavily exposed to shocks to the local economy, typically have stronger preferences for and stronger ex- posure to local news than high-skill and white individuals. At the same time, these disadvantaged individuals have been negatively affected by the impact of the digital revolution on news provision. In particular, high-skill and white indi- viduals have more rapidly embraced online and social media while low-skill and minority individuals still heavily rely on local television and other traditional news providers. These differences in provider choices are important because the digital revolution has reduced the quality of traditional news providers while the quality and quantity of online and social media have substantially in- creased. To gain additional insights into the welfare consequence of the digital revolution and assess potential policy interventions, we develop and estimate a model of news production and demand for local news. Our model is based on a time-allocation, discrete bundle-choice framework. Our findings suggest that the loss of the local newspaper (television) reduces welfare on average by $923 ($1064) which is well above the annual subscription costs in most markets. Finally, we study policies that subsidize online or social media to offset the loss of the local newspaper or television station.
Keywords: Local News; Digital Media; Welfare; Disadvantaged Individuals
JEL Codes: C0; L0; P0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Digital revolution (O33) | decline in quality of news for disadvantaged individuals (I24) |
| Loss of local newspapers (H74) | reduction in welfare for disadvantaged individuals (I38) |
| Loss of local television (L96) | reduction in welfare for disadvantaged individuals (I38) |
| Quality of online media (L15) | offset losses from traditional news providers (G32) |
| Quality of social media (L15) | offset losses from traditional news providers (G32) |