THE MEDIA RENT-SEEKING SOCIETY:

DIFFERENCES IN DEMOCRATIC AND AUTOCRATIC

ENVIRONMENTS

Revised version.

Gerald Hosp*

University of Fribourg (Switzerland)

September 2003

Abstract

Attention of the public is scarce and channeled by the mass media. This creates opportunities for

informational rent-seeking. Governments are in a favorable position for grasping media rents as

they can regulate the media. However, the extent of regulation and, thus, the agenda-setting power

are limited by their effects on the mass media credibility. In democratic environments the

government will choose informal ways like collusion with cooperative journalists and formal

measures like ownership of public broadcasters and subsidies pretending to ensure the variety of

opinions. Autocratic governments on the other hand favor more formal and direct forms of

controlling the flow of information. The concept of the media rent leads to the predictions that

government activities affect the credibility of the mass media, that the chief executive's time in

power has an impact on media repression, and that democratic and autocratic countries differ in

their instruments to gain the media rent. Cross-sectional and time-series evidence will be

presented.

Keywords: Institutional Media Economics, Rent Seeking, Comparative Institutional AnalysisJel-Code: D72, L82

* Gerald Hosp is research assistant at the Center of Public Finance at the University of Fribourg/Switzerland.Center of Public Finance, University of Fribourg, Av. de Beauregard 13, 1700 Fribourg, Switzerland.Tel.: +41/(0)26/300 82 65, Fax.: +41/(0)26/300 96 78, E-Mail: Gerald.Hosp@unifr.ch.I would like to thank Ivan Baron Adamovich, Reiner Eichenberger, Heribert Knittlmayer and Mark Schelkerwho provided helpful comments and suggestions.

11. Introduction

The mass media are the most important sources of information on politics. For a long

time, economic theory has ignored the impact of mass media on markets and politics.1

Recently, several contributions by Sen (1984), Djankov et al. (2001), Besley and Prat (2001),

Besley and Burgess (2002), Stromberg (2002), Dyck and Zingales (2002) and Mullainathan

and Shleifer (2002) have emphasized the perspective that mass media are institutions which

enable transfers of wealth and influence. Apart from the pure dispersion of information, there

are three channels through which mass media can affect economic and political outcome: (1)

Watchdog activities to disclose non-transparent ways in decision-making. (2) Involvement of

otherwise marginalized groups and special interests. (3) Creation of attention, which leads to

media rents. The latter point is in the focus of this article.

Politicians, interest groups, corporate advertisers and other opinion leaders try to

transmit their messages via mass media. But the ability to disperse information is restricted by

television air time and newspaper space. This creates opportunities for biased information

and, hence, media rents and rent-seeking activities. Especially governments attempt to exploit

the agenda-setting power of the mass media.

Freedom of speech and the press are at the bottom of democracy. Therefore, few people

would be surprised that autocratic governments are more inclined to oppress mass media than

democratic governments. But, the question is, why and how autocrats use media repression?

The economic literature has not yet dealt with the question of different forms of media

repression between different political regimes. In a recent paper Wintrobe (2002b) compares

the efficiency of democracies with autocracies. Human rights guarantee a low-cost procedure

to transfer political power. As it is assumed that in democracies human rights are protected

2and autocrats use their capacity to repress, Wintrobe (2002b) does not explain different

degrees of media repression. Moreover, many democratic countries experience limitations of

the freedom of speech. State ownership of media is common in many democracies. This paper

introduces the concept of the media rent to explain the differences and similarities of media

policies in democratic and autocratic environments.

Section 2 outlines the literature on autocracy that deals with the comparison of

democracies with autocracies. Part 3 elaborates the concept of a media rent and describes the

extraction of the media rent. Governments face a trade-off between the two determinants of

the media rent: the agenda-setting power and the credibility of the media and the media

system. In section 4 and 5 the democratic and autocratic media policies are described. Part 5

summarizes testable predictions and presents the empirical results. Section 6 points out

limitations and concludes.

2. Comparison of democracies and dictatorships: the contest for power

In the economic literature on autocracy the role of the media has been neglected, with

the exception of Sen (1984) who linked the observation that famines only occur under

dictatorships with the vitality of the media in a country. 2 Mass media are mentioned when the

armory of dictators is described. Along with restrictions on the political and civil rights of

citizens and on opposition parties and groups, the oppression of the media is a tool that

dictators typically use to stay in power (Wintrobe 1998, 2002b). Wintrobe (1990, 1998) has

developed a model to explain the behavior of dictators and points out that the use of

repression creates the so called Dictator's Dilemma: repression leads to less accurate

1 Orr (1987: 79) describes three reasons for the silence of economic analysis: First, individuals are perceived asrational. Second, prices deliver sufficient information to decision-makers. Third, preferences and technology aretreated as exogenous.2 Besley and Burgess (2002) show for India that the responsiveness of governments to natural disasters increaseswith the competitiveness of the media.

3information for the dictator about the society he rules. Therefore, he is ignorant of the real

support he has among the population. Consequently, even dictators rely on support of groups

in the society. For generating and maintaining power they use repression and loyalty or

popularity as instruments. A solution for the dilemma is to "overpay" supporters and to

repress the others.3

Another way of dealing with autocracy is to compare dictatorships with democracies. A

largely empirical literature concentrates on economic growth of dictatorships and democracies

(Przeworski et al. 2000, see for a recent survey Wintrobe 2002a). Olson (1993) and McGuire

and Olson (1996) provide the most prominent theory in regard to comparing political systems.

According to their concept, they differ between stationary and roving bandits. The stationary

bandit, unlike the roving one, has an encompassing interest in preserving the wealth of the

society that he exploits. Because of the superior impact on wealth, dictatorship arises out of

anarchy. As in democracies the interest of majorities are more encompassing than the interests

of the dictator, democracy is superior to dictatorship. Beside the encompassing interest, the

time horizon of democratic and autocratic governments determines the interest in preserving

or raising the wealth of the country. Governments with long time horizons are more favorable

for economic efficiency and growth. The concept of a stationary bandit implies that a raising

time horizon leads to more respect of individual rights. Freedom of speech and press are part

of these rights.

Wintrobe (2002b) focuses more on the conditions of the political competition.

Democracy has the advantage that the transfer of political power takes place at relatively low

costs. It solves the contest for power problem by competitive elections. The barriers to entry

into politics are lower and the opportunities for credible commitments by the government are

3 Wintrobe (1998) defines four types of regimes representing different combinations of repression and loyalty:tinpots (low repression and loyalty), tyrants (high repression, low loyalty), totalitarians (high levels of both), andtimocrats (low repression, high loyalty). In this paper, the four types are subsumed under the terms dictatorshipor autocracy. Emphasizing the differences between democracies and autocracies, the differentiation between thethese four types does not lie in the focus of the paper.

4more numerous in democracies than in autocracies (North and Weingast 1989). In addition,

human rights are a prerequisite for a functioning democracy. In autocracies there is no formal

mechanism for the transfer of power. The contest for power ends in revolutions, insurrections,

coups or wars. According to Wintrobe (2002b), autocrats have the capacity to repress

opposition and mass media. Because of the Dictator's dilemma, it is difficult for the autocrat

to assess the efficiency of his policies. If primarily those, who are opposed to and repressed

by the government, have to bear the cost of inefficient policies, these policies can persist even

when they are costly to the regime. Wintrobe (2002b) concludes that democracy is a more

efficient political system than autocracy. For distinguishing between democratic and

autocratic media policy, the concept of the contest for power is too dichotomous. It is

assumed that in democracies human rights are protected and autocrat uses their capacity to

repress. But, state ownership of media and limitations of freedom of speech are common in

many democratic countries. In 1988, the French intelligence service burned 17,000 copies of

an ex-agent's book which was claimed to threaten national security. In Italy the prime minister

Silvio Berlusconi controls the market for commercial television and influences the state

owned television channels. In, at least, authoritarian Belarus, there still exists an independent

press despite a wide range of repressive instruments which the government uses. State owned

newspaper pay less for printing and postal delivery. 4 The independent newspapers have to

submit their articles to an official censor before publication. These examples show that the

classification of political regimes and their media policies is not as straightforward as

proposed.

Nevertheless, the concept of the contest for power is useful in identifying the conditions

of functioning political competition and the impact of human rights on it.

3. Elements of a theory of the media rent

4 Since 1997 Freedom House classifies Belarus as "not free" (twelve points out of fourteen).

5For explaining the differences and similarities of media policies in democratic and

autocratic environments the concept of the media rent will be used.5 Mass media are regarded

as an allocative mechanism, aside markets and politics, that permits opportunities to transfer

wealth and influence. In this process two characteristics are important. First, the media rent is

created by the mass media themselves and is due to the impact of mass media on the

allocation of information and attention. Second, governments are able to create economic

rents by cartelizing private producers (Stigler 1971, McChesney 1987).

3.1. The rent-seeking process

At the bottom of the concept of a media rent is the scarcity of attention. Mass media are

able to focus and to create attention. Media workers redistribute attention in their function as

gatekeepers. Because of cognitive limitations, consumers of media content are not fully

informed. More realistic models include costs of information processing and psychological

considerations like cognitive dissonance or thinking in coarse categories (Eichenberger and

Serna 1996, Mullainathan and Shleifer 2002). Moreover, individuals' estimates are affected by

errors due to the processing and assessing costs of information. Caplan (2001) has offered a

model of irrationality on rational grounds which results in systematic errors. If error is cheap,

people will hold irrational beliefs. Eichenberger and Serna (1996) have shown that even under

the assumption of rational expectations unsystematic estimation errors are relevant at the

aggregated social level. As the mass media are an important provider of information, their

opportunities of exhausting information monopolies and of provoking estimation errors are

ample. Furthermore, mass media are coined by large fixed costs. Therefore, media markets

are highly concentrated. Because of important barriers of entry particular media possess

5 The notions democracy and autocracy are understood as two contrasting points on a continuum of politicalregimes.

6spatial or temporary monopolies resulting in discretionary power for the information

gatekeepers.

Limited attention leads to agenda setting. The agenda-setting effects of mass media are

well documented in public opinion research (McCombs 2002). Producers of information, like

politicians, interest groups, companies and anyone who benefits from a favorable public

opinion attempt to obtain the gains and to avoid the losses from an influenced media agenda.

In analogy to the rent-seeking model, media workers are passive brokers among competitive

rent seekers.6 The fact that certain information is transmitted, and not another, results in at

least short run benefits, the media rent. Unlike to the economic rent, suppliers of information

will be paid in influence, esteem, reputation, popularity or stardom. These non-financial

benefits can be transferred into economic rents or votes. Lott (1999) describes that the

distribution of transfers will be facilitated if mass media are controlled by the government.

The social costs of the media rent-seeking are twofold. First, the deadweight losses arise from

an inefficient allocation of information. The provision of information is distorted. Second, for

the competition of preferential treatment resources are invested to obtain agenda-setting

power or to resist it. High expenses for public relations, spin doctors and media trainer reflect

the attitude of a media rent-seeking society. The competition for rents can result in distortions

on the markets of goods which are used for gaining preferential treatment (Tullock 1967,

Sobel and Garrett 2002).

3.2. Media rent extraction by government: Agenda-setting power and credibility

Governments are in a favorable position in attaining media rents as they can shape the

regulatory framework and eliminate competition on media markets. Moreover, governments

are compared to the opposition attractive for the media because they can provide decisive and

relevant information. Or, they can try to extract private rents by threatening to regulate or

7deregulate the market (McChesney 1987). Rents can be extracted easier if firms exhibit firm-

specific private investments (Sidak 2002).

In all their actions governments have to cope with the mechanism that determines the

extent of the media rent. The media rent is affected by the capacity to prescribe the agenda

and the credibility of the media and the media system. The agenda setting power depends on

the ability to capture the media and to monopolize sources of attention. The use of these

instruments requires resources. Democratic and autocratic governments face different

constraints to regulate media markets as the concept of contest for power implies. The agenda

setting power can be used to influence the competition between issues ("what to think about")

or the competition within issues ("how to think about it") (McCombs 2002).

The contribution of the agenda setting power to the extent of the media rent is limited

by the perception of the credibility of the mass media. Credibility depends on the type of

regulation and its visibility. Regulation may be more or less visible because the intention may

be unclear, especially if it is linked to public interest, and because some regulations are

addressed to a small part of the population, the media workers. Following the notion of

Freedom House that publishes annually a survey of press freedom, regulation activities will

be distinguished between legal, political and economic measures. Table 1 specifies these

categories and shows their degree of perceptibility. Another impact on credibility has the

situation in which individuals have to make a decision. The credibility of the mass media is

less important if individuals face a low-cost decision. A further influencing factor are

psychological costs which arise if people are confronted with unpleasant news by the media.

Censorship in war times e.g. can dampen the psychological costs of bearing the atrocities of

war. Credibility of media increases if the news fit certain beliefs.

An increase in agenda setting power may take the form of an increase in the range of

activities to eliminate competition on media markets. Ceteris paribus, the risk of getting

6 As the focus of this paper lies in the impact of governments on the media, this assumption simplifies the

8biased news increases, and the credibility of the mass media will decrease. However, there is

an effect that works in the opposite direction: an increase in agenda setting power brings

along the facilitated prevention of psychological costs. At low levels of agenda setting power

this effect will be small for most individuals. It remains arguable if this effect occurs at high

levels.

Consequently, the more governments try to extract the media rent, the more the

credibility of the media decreases. The benefits of extracting increase with a diminishing

scale. Figure 1 depicts this situation. The maximum of the attainable media rent will be

reached at point M with an corresponding optimal degree of extraction, e*. By increasing

media regulation (or agenda-setting power) beyond this point, media rent will decline. The

shape of the curve is determined by the overall attitude towards media freedom by

governments and citizens, the type of media, the type of regulation and the rule of law. Other

intermediating factors are the size of a country which can constrain the possible number of

media outlets as well as illiteracy rate, openness of a country, linguistic heritage (and possible

access to media outside the country), education and size and number of minorities. Because of

the limited space, these factors cannot be discussed.

4. Democratic media policy

A democratic environment stands for constitutional guarantees of freedom of

expression, which are more or less enforced, and for the competitive elections of

governments. Only exceptions like information externalities are admissible for restrictions of

freedom of expression. 7 Nevertheless, the above mentioned examples indicate that even in

democracies mass media are more regulated than welfare theoretic considerations would

suggest.

concept. Nevertheless, mass media can pursuit economic and ideological aims.

9In democracies competition between media outlets will be more intensive and market

entry easier than in autocratic countries. Thus, the government will lose some agenda-setting

competence to the media and gain a potentially higher media rent due to increased credibility.

For extracting the media rent, governments will use more invisible instruments like increases

collusion with co-operative journalists and more activities partly pretending to care about the

public interest like subsidies and public broadcasting.8 Visible and formal measures will be

used less in order to strengthen the credibility of the media system. But, why are governments

interested in increasing credibility? The opposition may gain from credibility too.

Nevertheless, governments are in a favorable position, especially for the competition within

issues. On a market for attention producers will demand attention, if the expected value of the

media rent exceeds the costs of pushing the message into the media. Governments have lower

costs for providing information and possess the more relevant information and more credible

threat of extracting rents than opposition. This relative advantage over the opposition suggests

an incumbency effect.9

Therefore, government is interested in increasing credibility of media. At the same time

it is in the better position to impose invisible regulations than the opposition. The diverse

mass media are differently vulnerable to rent extraction activities by governments. Compared

to publishing, television exhibits higher levels of fixed costs and more significant economies

of scale. These fixed costs represent sunk costs which make market entry and exit difficult.

Therefore it is far easier to control television than publishing. Media coverage can be better

influenced by "soft" instruments like state ownership, subsidies or licensing, whereas media

which have lower sunk costs, like publishing, are better tamed by repression or criminal law.

Because of welfare-theoretic considerations for public broadcasting, television can, also in a

democratic setting, come under the influence of the state. Nevertheless, state ownership is not

7 Examples for information externalities are violence at television or child pornography.8 Murschetz (1999) describes various impacts of state support for daily press in different countries.9 Government could build a cartel with the opposition to prevent new entry into the political market.

10

necessary for protecting the public interest. E.g. Sunstein (1999) has proposed mandatory

public disclosure of information about public interest broadcasting, economic incentives as

"play-or-pay" and voluntary self-regulation by the industry as instruments for fulfilling the

public interest obligation. However, Djankov et al. (2001) could not find any benefits of state

ownership.

The concept of the media rent implies that governments have a comparative advantage

compared to the opposition. Constitutional guarantees cannot prevent these transactions costs

in the contest for power, as governments use discretionary political instruments. If these are

perceptible, credibility will decrease. Therefore, they tend to exploit the media rent by

discreet measures and push credibility by supporting formal freedom of expression. To gain

the media rent democratic governments regulate television more than publishing.

5. Autocratic media policy

Autocratic governments try to control media more than democratic governments.

Nevertheless, they often avoid open repression and use instruments like shortage of paper or

excessive taxation. Even in totalitarian states like the former USSR, people could write letters

to the editor. These are attempts to solve the Dictator's dilemma. But, as the contest for power

is inefficient in autocracies, dictators want above all limit the competition between issues.

They exploit their capacity to set the agenda. This imposes costs on the dissemination of

opposing opinions, and increases the costs of opposition groups organizing and the random

estimation errors of the citizens. The effects of psychological costs and indoctrination are

controversial:

"No one has produced any evidence of brainwashing even after the exposure for

over 50 years to Communist propaganda. So to suggest that these regimes

11

survive through their capacity to indoctrinate does not add much to our

understanding of how these regimes work."10

Due to the direct influence on the media they will lose credibility but they gain agenda-

setting power. In addition, the increased possibility to create and extract rents in other

industries because of an absent critical press. Thus, perceivable regulations are more common.

If the repressed have to bear the costs of the inefficient policies, these kind of policies can

improve the dictator's probability of survival.

However, rational individuals know that players with an information monopoly attempt to

bias information, especially if the world in the media differs substantially from the self

perceived reality. Citizens will try to de-bias dirty information provided by the government or

change their media use in such a way that entertainment is preferred to information

(Eichenberger and Serna 1996). Thereby, individuals can even overshoot by de-biasing dirty

information. In the former communist countries theatregoers have sometimes seen subversive

messages in the plays of dramatists who were loyal to the regime (Harrison 2001). Thus, for

maintaining a certain level of dirty information in a society, repression of media has to

increase. Spagat (2001) has developed a dynamic model of repressive dictatorships and

concludes similarly that there should be recurring big repression. Therefore, repression

increases with long tenure. In addition to state ownership or dependent editors, more direct

ways like violence, harassment, intimidation and official censorship will be used. Visible

repression will heat up self-censorship too. On the other hand, visible oppression could be a

signal of "good journalism". Journalists who are threatened and harassed seem to be critical

and a menace for the government or interests groups. For example, the radio station B92 had

the reputation to be the last free medium in Yugoslavia until it was closed in 1999. One part

of the reputation arose after the attempts of the government to silence B92. However, the

10 Wintrobe (2001: 37).

12

autocratic government will face a credibility-repression spiral and has to intervene

increasingly.

The problem of the contest for power leads to the requirement that the media agenda has

to be controlled by the dictator. As he wants to assure his survival he is forced to disregard the

credibility of the media. Because of the dynamics of repression, the intensity of repression

does not decrease with the tenure of the regime, contrary to the conclusion of Olson (1993). In

autocracies the whole range of repressive methods are employed. Therefore, state ownership

of the press is common.

6. Empirical results

Based on the foregoing arguments three predictions will be tested. First, the impact of

the government on the credibility of mass media. Second, the importance of the tenure for

media freedom. Third, the different use of instruments in democracies and autocracies.

6.1. Credibility and media repression

The credibility of mass media and the media system, and thus the media rent, depend on

the activities of the government. Repression will diminish the credibility of media.

Questionable is, if visible oppression like harassment and intimidation of journalists leads to

more self-censorship and less trust in media, or if repression will be perceived as a signal for

critical journalism which results in more trust in specific media.

In the following regressions, the share of people by country that tend to trust in

television as an institution is used as a proxy for credibility of mass media. The choice of the

sample is driven by data availability.11 Because of cross-sectional data, an OLS regression

11 The variable is composed of several surveys with slightly different questions. The results for Central and EastEurope, Latin America, Africa and East Asia can be checked up at www.globalbarometer.org. Survey for theEuropean Union is provided by Eurobarometer.

13

with robust standard errors can be run. The number of observations is limited to 44 countries.

Therefore the interpretation of the results has to be done with care. Nevertheless, they will

provide a first hint.

The capacity of agenda setting power is measured by the variable media repression. The

variable is taken from the Freedom House's Survey of Press Freedom and ranges from 0 to

100, with higher numbers representing more media oppression. There are three main

dimensions of media oppression considered: legal, political and economic.

In Table 2 the prediction that media repression leads to less credibility will be tested.

The share of people by country that tend to trust in television is the dependent variable.

Controls for population, GDP per capita and regional characteristics are included. Population

is an indicator for the size of media markets. Countries with a sizable population have

potentially more media outlets and more media competition that leads to an increased

credibility. On the other hand, the demand of the population decreases in big countries,

because exit is very unlikely. Migration takes place within the country. The sign of GDP per

capita can be positive, because, with higher incomes, people demand more and better

information. On the other hand, higher income implies more wealth that could by extracted by

biasing information (Lott 1990, 1999).

Indeed, media repression has a negative and statistically significant (at the 10 percent

level) impact on credibility in television. GDP per capita is also negative and statistically

significant. If violence against journalists is included, media repression is negative and

significant.12 Violence against journalists has a positive and significant impact on trust. This

could be a hint for political oppression as quality signal for media. Like the examples in

former Yugoslavia or Belarus indicate, there are independent media even in very autocratic

countries. But, the reliability of the answers of people in autocratic states has to be

considered.

14

In Table 3 the variable media repression is broken down its dimensions, looking for the

impact of the different measures. The prediction would be that the legal means have little

impact as constitutional guarantees cannot prevent the transactions costs in the contest for

power, as governments use discretionary political instruments.13 Political and economic means

should have a negative effect on credibility. The regressions in Table 2 casts doubt on the sign

of political means. The results in the first three columns show that only economic means are

perceived as danger for the credibility of media. Political and legal means are positive, but

insignificant. The results are not sensitive to the inclusion of ownership.

In column four, interaction terms between the dimensions of oppression and autocracy

are included. Legal means have no impact on the credibility or trustworthiness of television.

Political means reduce the credibility of television, but in more autocratic countries political

instruments enhance trust. This result supports the prediction that open oppression may be a

signal for vivid and critical press. Economic means are generally positive and insignificant,

whereas in autocratic states they are negative and significant at the 10 percent level.

Economic means in more autocratic states are state ownership, impact of corruption and

bribery on media content, excessive taxation and other economic obstacles like shortage of

paper. This leads often to higher prices for independent media.

6.2. Tenure and media repression

According to Olson (1990), the time horizon of democratic and autocratic governments

determines the interest in preserving or raising the wealth of the country, besides the

encompassing interests. Governments with long time horizons are more favorable for

economic efficiency and growth. The concept of a stationary bandit implies that a raising time

horizon leads to more respect of individual rights (Olson 1996). But, referring to Olson

12 Violence against journalists consists of cases of killed, kidnapped, arrested and expelled journalists (FreedomHouse 2000).13 Unfortunately, I could not, yet, find sufficient data for measuring the rule of law for this sample.

15

(1982), long-term stability is bad for prosperity because it leads to interest groups sclerosis.

Whereas Spagat (2001) and the here proposed concept of a media rent imply that the time in

power and the repression of media are positively linked.

For testing the statements, media repression is regressed on the government chief

executive's time in power. The independent variable is taken from the Database on Political

Institutions (Beck et al. 2001). The Databank for Political Institutions provides another

variable that can be used as an indicator for political stability: tenure of system. If the country

is democratic, the tenure of the system of government is used, otherwise the tenure of the

chief executive (Beck et al. 2001).

The sample consists of the Central and East European countries and the former Soviet

Union. The inspection of this sample has the advantage that some country specific variables

like legal origin are more identical than in a larger sample, nevertheless there is cross-

sectional and time series variation in the questionable variables.14

To control for other variables that may influence the relationship, I ran fixed effects

regressions. While not all variables are available for the entire study period, many are. As a

baseline model I use a fixed effects model that includes state and year fixed effects.

Therefore, time series and cross-sectional variation in the questioned variables is assumed.

The fixed effects are crucial to dealing with unobservable differences between countries.

Control variables are log of population, GDP per capita at PPP, illiteracy rate, exports

and imports (% of goods and services GDP) and log aircraft departure per capita. The two

latter variables indicate the openness of a country. Log aircraft departure per capita is a proxy

for flow of people and not only goods and services which can influence the available amount

14 The countries used in this sample are Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina,Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Lithuania,Macedonia, Moldova, Poland, Romania, Russian Federation, Slovak Republic, Slovenia, Tajikistan,Turkmenistan, Ukraine, Uzbekistan, Federal Republic of Yugoslavia. The observation period is from 1994 to2001.

16

of information in a country. 15 The illiteracy rate should rise the benefits from controlling

broadcasting, but makes less necessary to regulate publishing. The openness of a country

brings along a flow of information from abroad. That could undermine the information policy

of the government or heat up oppression of mass media.

The results in Table 4 show that the variables chief executive's year in power and

stability of system have different effects on media freedom. If the chief executive's years in

power rises, media repression increases statistically significant. Whereas the tenure of the

system has a negative impact on media repression. This effect is four times larger than the

former. Due to this results, both views are supported. Long-established systems are favorable

for the freedom of media, as Olson (1990) proposes. But, the chief's executive time in power

affects negatively the ranking of media freedom, as suggested in this paper. Media repression

lies in the individual interest of the chief executive. Therefore, the ruling individual and the

system cannot be regarded as an unity. Dictators and other long-serving politicians are fond of

personality cult that separates them from the regime. Regressions with years in power of the

chief executive's party yield no significant results. Also, constitutional limits on tenure have

no impact.

The weakness of the results lies in the low overall R2. Regarding the corresponding

within and between R2 reveals that especially variation within a country is explained by the

specification.

The regression in column five includes the illiteracy rate. The results show some

deviations from the former columns. This can be explained to some extent by the poor data

availability of the illiteracy rate. Moreover, Albania is an outlier with an average rate of 16%,

whereas the other countries exhibit rates lower than 3%. If Albania is excluded from the

sample and the log of the illiteracy rate is taken, the effects of the important variables get

15 The choice of the controls follows the list of intermediating factors under 3.2. Unfortunately, WDI 2001 doesnot provide sufficient panel data for schooling. For this sample, linguistic heritage is of minor interest. As

17

statistically significant at the 5%-level. Nevertheless, for further investigations the impact of

the illiteracy rate has to be considered carefully.

Except for GDP per capita, the control variables show no significant influence. The

negative sign of GPD per capita indicates that a higher income leads to a higher demand for

information.

6.3. Regulation of broadcasting and publishing

Democratic governments tend to exploit the media rent by discreet measures and push

credibility by supporting formal freedom of expression. Thus, to gain the media rent

democratic governments regulate television more than publishing. Compared to publishing,

television is more vulnerable to rent extraction because of higher levels of fixed costs. Media

coverage can be better influenced by discreet and "soft" instruments like state ownership,

subsidies or licensing. In addition to different cost structures, the immediacy and broader

reach of television generate greater control benefits. Respectively, it generates more costs if

television is not controlled.

To test this prediction, the relationship between autocracy (or media oppression) and

state ownership will be regarded.16 As state ownership is a wide spread and important form of

controlling mass media, it is a good indicator for government's activities. In democracies,

governments may influence mass media by appointing boards and commissions, whereas

authoritarian governments control more directly.

Djankov et al. (2001) find that television has higher levels of state ownership than

newspapers. Especially Western Europe countries exhibit state ownership of broadcasters to a

large extent. Nevertheless, authoritarian countries are more likely to own television and

newspapers.

fractionalization data as indicator for minorities does not exhibit time series variation, a random effects modelhas been estimated, but not reported. The results are not much affected by fractionalization.16 Since the data are cross-sectional, an OLS regression with robust standard errors has been used.

18

The first two columns in Table 5 support these findings. Autocratic states are more

inclined to own newspapers and television stations. State ownership of the press is defined as

the percentage of state-owned newspapers out of the five largest daily newspapers. In

analogy, state ownership of television is the percentage of state-owned television stations out

of the five largest television stations (Djankov et al. 2001). But, the results indicate that

autocratic states are more likely to own newspapers than television stations. The increase of

one point in autocracy brings about 15 percent more state ownership of newspapers, whereas

state ownership of television stations rises only by eight percent. Democratic governments

tend more to gain a media rent by influencing television than newspapers. In contrast to

Djankov et al. (2001) the results suggest that richer countries have higher state ownership.

Until 2000 Freedom House's Survey of Press Freedom provided separate measures of

oppression for broadcasting and publishing. These ratings and interaction terms between

oppression of media and autocracy have been included to the regression. Column 3 shows the

results for state ownership of press. Autocracy remains positive, but gets insignificant.

Oppression of broadcasting and press, as well as the interaction term between autocracy and

oppression of broadcasting are insignificant. The interaction term between press oppression

and autocracy is statistically significant on a 10 percent level and negative, signalling that in

autocratic states oppression of press is a substitute for state ownership. The results for

television in column 4 suggest that the level of oppression of broadcasting has a positive

impact on state ownership, incorporating that ownership is a part of oppression. But the

interaction term with autocracy is negative and significant at the 10 percent level . The

oppression of press has a negative sign, and the sign of the interaction term suggests that

autocratic states with a high level of press oppression also have a high share of state-owned

television, otherwise countries with high press oppression exhibit low state ownership.

Autocratic countries use oppression as a substitute for ownership if the same media are

concerned, whereas the oppression of one kind of media is a good predictor for state

19

ownership of another kind of media. As many democracies have state-owned television

stations, the results implicate that democracies are more inclined to regulate broadcasting than

publishing. In more democratic states, oppression of press is negatively related to state

ownership of television.

7. Limitations and concluding remarks

Before summarizing the conclusions, some limitations that point the way towards

further research are worth noting. First, Freedom House's Survey of Press Freedom differs

between legal, political and economic means. Unfortunately, the distinction between more

visible or hidden instruments and the possibility to link an instrument to public interest is not

made by Freedom Houses survey. Each dimension contains both kinds of means. Therefore,

a clear distinction cannot be made and each country has to be regarded carefully to understand

the kind of media repression.

Second, it is likely that others factors are involved in the process determining the degree

of media repression and the capacity for agenda-setting. Moreover, the impact of the used

control variables is not explored sufficiently.

Third, the different types of political regimes are pooled without taking differences

explicitly into account. Sub-samples may lead to a more differentiated view on the subject.

Nevertheless, the arrangement of political regimes is sometimes ambiguous and can be

affected by changes over time.

Mass media are neglected institutions in economic literature. Because of their immense

impact on markets and politics, a better understanding of their functioning would be desirable.

One channel through which mass media can affect economic and political outcome is their

20

ability to create attention. The redistribution of attention can lead to media rents for

politicians, interest groups, corporations and other opinion makers.

The empirical results suggest that the credibility of mass media depends on the activities

of the government. There are hints that violent oppression of mass media enhances the

credibility of mass media in autocratic states, whereas in more democratic states political

means have a negative impact on trust. Legal means do not show any effect.

The tenure of the chief executive has a negative effect on media freedom, whereas the

stability of a system leads to more media freedom. This holds for all political regimes.

Seemingly, the personality cult exists not only in autocracies.

Autocratic countries use oppression as a substitute for ownership if the same media are

concerned, whereas the oppression of one kind of media is a good predictor for state

ownership of another kind of media. As many democracies have state-owned television

stations, the results implicate that democracies are more inclined to regulate broadcasting than

publishing. In more democratic states, oppression of press is negatively related to state

ownership of television.

21

References

Alesina, Alberto, Arnaud Devleeschauwer, William Easterly, Sergio Kurlat and Romain

Wacziarg (2002): Fractionalization. NBER Working Paper 9411.

Beck, Thorsten, George Clarke, Alberto Groff, Philip Keefer and Patrick Walsh (2001): New

Tools and new tests in comparative political economy: The Database of Political

Institutions. World Bank Economic Review 15(1): 165-176.

Besley, Timothy and Robin Burgess (2002): The Political Economy of Government

Responsiveness: Theory and Evidence from India. Quarterly Journal of Economics

117(4): 1415-1451.

Besley, Timothy and Anne Case (2003): Political Institutions and Policy Choices: Evidence

from the United States. Journal of Economic Literature 41: 7-73.

Besley, Timothy and Andrea Prat (2001): Handcuffs for the Grabbing Hand? Media Capture

and Political Accountability. London School of Economics Working Paper.

Bikhchandani, Sushil, David Hirshleifer and Ivo Welch (1998): Learning from the Behavior

of Others: Conformity, Fads, and Informational Cascades. Journal of Economic

Perspectives 12(3): 151-170.

Caplan, Bryan (2001): Rational Ignorance versus Rational Irrationality. Kyklos 54(1): 3-26.

Djankov, Simeon, Carelee McLiesh, Tatiana Nenova, and Andrei Shleifer (2001): Who Owns

the Media? NBER Working Paper 8288.

Dyck, Alexander and Luigi Zingales (2002): The Corporate Governance Role of the Media,

in: Islam, Roumeen (ed.): The Right To Tell: The Role of Mass Media in

Economic Development . Washington D.C.: The World Bank, 107-137.

Eichenberger, Reiner and Angel Serna (1996): Random Errors, Dirty Information, and

Politics. Public Choice 86: 137-156.

22

Harrison, Nicholas (2001): Complicity. In: Jones, Derek (ed.): Censorship: A World

Encyclopedia. London etc.: Fitzroy Dearborn, 564-565.

Kohl, Judith C. (2001): Book Burning. In: Jones, Derek (ed.): Censorship: A World

Encyclopedia. London etc.: Fitzroy Dearborn, 264-265.

La Porta, Rafael, Florencio Lopez de Silanes, Andrei Shleifer and Robert Vishny (1999): The

Quality of Government. Journal of Law, Economics and Organization 15(1): 222-279.

Lott, John R. Jr. (1990): An Explanation For Public Provision of Schooling: The Importance

of Indoctrination. Journal of Law and Economics 33: 199-231.

McChesney, Fred S. (1987): Rent Extraction and Rent Creation in the Economic Theory of

Regulation. Journal of Legal Studies 16: 101-118.

McCombs, Maxwell (2002): The Agenda-Setting Role of the Mass Media in the Shaping of

Public Opinion. Working Paper, University of Texas at Austin.

McGuire, Martin C. and Mancur Olson (1996): The Economics of Autocracy and Majority

Rule: The Invisible Hand and the Use of Force. Journal of Economic Literature 34(1):

72-96.

Miller, David and William Dinan (2000): The Rise of the PR Industry in Britain, 1979-98.

European Journal of Communication 15(1): 5-35.

Mullainathan, Sendhil and Andrei Shleifer (2002): Media Bias. NBER Working Paper 9295.

Murschetz, Paul (1998): State Support for the Daily Press in Europe: A Critical Appraisal:

Austria, France, Norway and Sweden Compared. European Journal of

Communication 13(3): 291-314.

North, Douglass C. and Barry R. Weingast (1989): Constitiutions and Commitment: The

Evolution of Institutions Governing Public Choice in Seventeenth-Century England.

Journal of Economic History XLIX(4): 803-832.

Oberholzer, Felix and Joel Waldfogel (2001): Electoral Acceleration: The Effect of Minority

Population on Minority Voter Turnout. NBER Working Paper 8252.

23

Olson, Mancur (1982): The Rise and Decline of Nations. New Haven: Yale University Press

Olson, Mancur (1993): Dictatorship, Democracy, and Development. American Political

Science Review. 87(3): 567-576.

Orr, Daniel (1987): Notes on the mass media as an economic institution. Public Choice 53:

79-95.

Przeworski, Adam, Michael E. Alvarez, Jose Antonio Cheibub and Fernando Limongi (2000):

Democracy and Development: Political Institutions and Well-Being in the World

1950-1990. New York: Cambridge University Press.

Raiser, Martin, Mark Schaffer and Johannes Schuchardt (2003): Benchmarking structural

change in transition. European Bank for Reconstruction and Development Working

Paper 79.

Sen, Amartya (1984): Poverty and Famines. Oxford University Press: Oxford.

Sidak, Gregory J. (2002): An Economic Theory of Censorship. American Enterprise Institute

for Public Policy Research, Working Paper.

Sobel, Russell S. and Thomas A. Garrett (2002): On the Measurement of Rent Seeking and its

Social Opportunity Cost. Public Choice 112(1/2): 115-136.

Strmberg, David (2002): Distributing News and Political Influence, in: Islam, Roumeen

(ed.): The Right To Tell: The Role of Mass Media in Economic Development .

Washington D.C.: The World Bank, 95-106.

Sunstein, Cass R. (1999): Private Broadcasters and the Public Interest: Notes Toward a "Third

Way". Law School, University of Chicago Working Paper.

Spagat, Michael (2001): The Dynamics of Repressive Dictatorships. Royal Holloway College,

Working Paper.

Tullock, Gordon (1967): The Welfare Costs of Tariffs, Monopolies, and Theft. Western

Economic Journal 5(3): 224-232.

24

Wintrobe, Ronald (1990): The Tinpot and the Totalitarian: An Economic Theory of

Dictatorship. American Political Science Review 84: 849-872.

Wintrobe, Ronald (1998): The Political Economy of Dictatorship. New York: Cambridge

University Press.

Wintrobe, Ronald (2001): How to understand, and deal with dictatorship: an economist's

view. Economics of Governance 2: 35-58.

Wintrobe, Ronald (2002a): Dictatorship. University of Western Ontario, Working Paper.

Wintrobe, Ronald (2002b): The Contest for Power: Human Rights and Economic Efficiency.

University of Western Ontario, Working Paper.

25

Appendix

Description of the variables

Variable name Description Source

Media repression

Rating for media oppression. Countries scoring 0 to 30 areregarded as having a free press; 31 to 60 a partly-freepress; 61 to 100 a not-free press. The level of mediarepression in each country is divided into three broadcategories: the legal environment, political influences,economic pressures.

Survey of PressFreedom, FreedomHouse (various years)

Autocracy rating

Index of political rights. Lower ratings indicate countriesthat come closer to the ideals suggested by the checklistquestions of : (1) free and fair elections; (2) those electedrule; (3) there are competitive parties or other competitivepolitical groupings; (4) the opposition has an importantrole and power; (5) the entities have self-determination oran extremely high degree of autonomy.

Freedom of the world,Freedom House(various years)

Legal means

Rating for the use of legal means. Laws and regulationsthat could influence media content as well as thegovernments inclination to use these laws to restrict theability of media to operate: impact of legal andconstitutional guarantees for freedom of expression, as wllas the potentially negative aspects of security legislation,the penal code and other criminal statutes, penalties forlibel and defamation, and registration requirements forboth media outlets and journalists.

Survey of PressFreedom, FreedomHouse (various years)

Political means

Degree of political control over the content of newsmedia: access to information and sources, editorialindependence, official censorship and self-censorship,ability of the media to operate freely and withoutharassment, and the intimidation of journalists by the stateor other actors.

Survey of PressFreedom, FreedomHouse (various years)

Economic means

Structure of media ownership, the costs of establishingmedia outlets as well as of production and distribution, theselective withholding of state advertising or subsidies,official bias in licensing, and the impact of corruption andbribery on content.

Survey of PressFreedom, FreedomHouse (various years)

Repression ofbroadcasting Sub-index for broadcasting.

Survey of PressFreedom, FreedomHouse (2000)

Repression of press Sub-index for press.Survey of PressFreedom, FreedomHouse (2000)

Trust in television

Percentage of people answering Tend to trust. Forexample, question at Eurobarometer is: I would like toask you a question about how much trust you have incertain institutions. For each of the following institutions,please tell me if you tend to trust it or tend not to trust it.Slightly different questions at the other surveys. Ifnecessary, categories have been compressed.

New EuropeBarometer, NewRussia Barometer,New DemocraciesBarometer 2001; EastAsia Barometer 2001-2002;LatinoBarometro1997; Afrobarometer1999-2001;Eurobarometer 1999

26

Log of Population Log of total population.World DevelopmentIndicators 2001 and2003

GDP per capita GDP per capita and PPP-adjusted

Raiser et al. (2003);World DevelopmentIndicators 2001 and2003

Chief executive's year inoffice Years that the chief executive is in office. Beck et al. (2001)

Stability of systemTenure of system of government if democratic; tenure ofchief executive otherwise.

Beck et al. (2001)

Illiteracy rateTotal adult illiteracy rate (percent of people ages 15 andabove).

World DevelopmentIndicators 2001 and2003

Exports Exports (percent of goods and services GDP).World DevelopmentIndicators 2001 and2003

Imports Imports (percent of goods and services GDP).World DevelopmentIndicators 2001 and2003

Log aircraft departures percapita

World DevelopmentIndicators 2001 and2003

Ethnic fractionalizationOne minus the Herfindahl index on ethnolinguistic groupshares.

Alesina et al. (2002)

Linguisticfractionalization

One minus the Herfindahl index on linguistic groupshares. Alesina et al. (2002)

Religious fractionalization One minus the Herfindahl index on religious group shares. Alesina et al. (2002)

Regional dummiesThe six regions are Sub-Saharan Africa, Americas, Asiaand Pacific, Middle-East and North Africa, Central andEast Europe, Western Europe.

La Porta et al. (1998)

Legal originDummies for legal origin: english, french, socialist,german, scandinavian

La Porta et al. (1998)

PressPercentage state-owned newspapers out of the five largestdaily newspapers (by circulation), 1999.

Djankov et al. (2001)

TelevisionPercentage state-owned television stations out of the fivelargest television stations (by viewership), 1999. Djankov et al. (2001)

Violence againstjournalists

Sum of cases of killed, kidnapped, disappeared, abducted,arrested and expelled journalists, 1999.

Freedom of the world,Freedom House(2000)

27

Figure 1: The degree of control and the media rent

Mediarent

Degree of controle*

M

28

Table 1: Type of regulation

Visible and/or weak link to

public interest

Invisible and/or strong link to

public interest

Legal Constitutional guarantees for

freedom of expression; laws

protecting the honor of

governmental institutions, officials

and symbols, including criminal

prosecution

Registration requirements for both

media outlets and journalists;

criminal defamation and libel law;

protection of confidential sources

Political Violence against and harassment

and intimidation of journalists;

official censorship and self-

censorship

Access to information and sources;

editorial independence; selective

dissemination of information by

governments

Economic Structure of media ownership

(state and/or private); impact of

corruption and bribery on content

Public Broadcasting; costs of

establishing media outlets,

selective withholding of state

advertising or subsidies; licensing

requirements; taxation

29

Table 2: Credibility and media repression

Dependent variable: Trust in television (% of country)OLS with robust standard errors

(1) (2)

Media oppression -0.30(-1.71)

-0.51(-2.60)

Violence againstjournalists

0.78(1.72)

Log of population-2.25

(-0.62)-2.99

(-0.88)

GDP per capita-0.98e-3

(-1.99)1.05e-3

(-2.59)

Regional dummies Yes Yes

Constant114.65(4.00)

125.03(4.78)

Number ofobservations

44 44

R2 0.68 0.71

Notes: t-statistics in parentheses. The countries used in this regression are Argentina, Austria, Belgium, Brazil,Bulgaria, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany,Ghana, Greece, Hungary, Ireland, Italy, Japan, Korea (South), Lithuania, Malawi, Mali, Mexico, Netherlands,Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Slovak Republic, Slovenia, South Africa,Spain, Sweden, Tanzania, Thailand, United Kingdom, Venezuela, Zambia, Zimbabwe. The six regions are Sub-Saharan Africa, Americas, Asia and Pacific, Middle-East and North Africa, Central and East Europe, WesternEurope.

30

Table 3: Credibility and media repression

Dependent variable: Trust in television (% of country)OLS with robust standard errors

(1) (2) (3) (4)

Legal means 0.22(0.32)

0.23(0.35)

0.24(0.36)

-0.02(-0.02)

Legal means *autocracy rating

-0.01(-0.05)

Political means0.151.30)

0.12(0.98)

0.12(0.89)

-1.26(-1.75)

Political means *autocracy rating

0.50(1.98)

Economic means-1.45

(-2.34)-1.43

(-2.25)-1.40

(-2.17)0.76

(0.64)

Economic means *autocracy rating

-1.02(-1.86)

Autocracy rating-0.83

(-0.30)-0.31

(-0.10)-0.48

(-0.17)-0.11

(-0.01)

Log of population-1.59

(-0.43)-1.57

(-0.42)-1.49

(-0.39)2.39

(0.53)

GDP per capita-0.66e-3

(-1.01)-0.64e-3

(-0.93)-0.62e-3

(-0.91)-0.72e-3

(-1.10)

State ownership TV(by count)

-6.48(-0.51)

Private ownership TV(by count)

6.01(0.49)

Regional dummies Yes Yes Yes Yes

Constant103.82(3.06)

105.54(3.02)

98.56(2.67)

77.07(1.71)

Number ofobservations

44 44 44 44

R2 0.70 0.70 0.70 0.75

Notes: t-statistics in parentheses. The countries used in this regression are Argentina, Austria, Belgium, Brazil,Bulgaria, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany,Ghana, Greece, Hungary, Ireland, Italy, Japan, Korea (South), Lithuania, Malawi, Mali, Mexico, Netherlands,Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Slovak Republic, Slovenia, South Africa,Spain, Sweden, Tanzania, Thailand, United Kingdom, Venezuela, Zambia, Zimbabwe. The six regions are Sub-Saharan Africa, Americas, Asia and Pacific, Middle-East and North Africa, Central and East Europe, WesternEurope.

31

Table 4: Tenure and media repression

Dependent variable: media repressionFixed effects regression

(1) (2) (3) (4) (5)

Chief executive's yearin power

0.51(1.75)

0.79(2.63)

0.54(1.84)

0.66(1.66)

Stability of system-1.93

(-2.76)-1.77

(-2.41)-1.90

(-2.75)-3.33

(-1.81)

Autocracy3.32

(3.76)3.73

(4.35)3.36

(3.87)2.30

(2.40)

Log of population-53.72(-0.97)

-66.79(-1.23)

-75.09(-1.28)

-91.49(-1.65)

-0.99(-0.01)

GDP per capita-3.75e-3

(-3.28)-3.76e-3

(-3.24)-3.83e-3

(-3.17)-3.95e-3

(-3.46)-6.49e-3

(-3.45)

Illiteracy rate6.14

(0.73)

Exports0.10

(1.24)0.11

(1.41)0.11

(1.34)0.08

(1.04)

Imports-0.11

(-1.27)-0.09

(-1.13)-0.12

(-1.34)-0.09

(-1.06)

Log Aircraftdepartures per capita

-4.44(-1.54)

-3.76(-1.32)

-7.52(-2.66)

-3.84(-1.36)

Constant417.65(1.09)

379.62(1.38)

578.26(1.41)

695.12(1.80)

72.87(0.10)

Number ofobservations

146 144 144 144 99

R2 within 0.35 0.37 0.30 0.39 0.31

R2 between 0.11 0.07 0.01 0.03 0.52

R2 overall 0.09 0.05 0.01 0.01 0.48

Notes: t-statistics in parentheses. All regressions are run from 1994 to 2001 and control for year and state fixedeffects. The countries used in this regression are Albania, Armenia, Azerbaijan, Belarus, Bosnia andHerzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Republic,Latvia, Lithuania, Macedonia, Moldova, Poland, Romania, Russian Federation, Slovak Republic, Slovenia,Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Federal Republic of Yugoslavia.

32

Table 5: State ownership and media repression

Dependent variable: state ownership of media, by countOLS with robust standard errors

Press(1)

Television(2)

Press(3)

Television(4)

Autocracy rating 0.15(4.11)

0.08(3.71)

0.25(1.49)

0.08(0.90)

Repression ofbroadcasting

-0.02(-0.71)

0.02(2.14)

Autocracy *Repression ofbroadcasting

0.01(0.49)

-0.01(-1.73)

Repression of press0.06

(1.44)-0.03

(-2.76)

Autocracy *Repression of press

-0.01(-1.85)

0.01(1.81)

Log of population-0.17

(-0.76)-0.03

(-0.44)-0.19

(-0.69)-0.02

(-0.33)

GDP per capita0.22e-3

(1.80)0.01e-3

(0.64)0.04e-3

(1.26)0.01e-3

(0.49)

Openness Yes Yes Yes Yes

Regional dummies Yes Yes Yes Yes

Legal origin Yes Yes Yes Yes

Fractionalization Yes Yes Yes Yes

Constant0.98

(0.51)0.65

(0.84)0.24

(0.13)0.73

(1.02)

Number ofobservations

82 82 82 82

R2 0.32 0.23 0.38 0.67

Notes: t-statistics in parentheses. Yes indicates that controls are used. Openness controls are: exports andimports. The six regions are Sub-Saharan Africa, Americas, Asia and Pacific, Middle-East and North Africa,Central and East Europe, Western Europe.Dummies for legal origin: english, french, socialist, german, scandinavian. Fractionalization controls are: ethnic,language and religion.