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No news is costly news: The link between the diffusion of the press and public spending

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  • Petrarca, Ilaria
Abstract
This paper studies the link between the diffusion of news and spending decisions. We exploit a dataset of Italian Regions from 1984 to 2008, approximate the spread of information with the diffusion of newspapers, and estimate the effect of the news before and after 1995. In fact, in the mid-90s two reforms introduced the direct election of the governor, autonomous taxing powers and incentives for fiscal discipline at the regional level in Italy. We test the following hypotheses, derived from the theoretical literature: 1) the diffusion of newspapers affects public expenditures close to elections; 2) the more newspapers are diffused, the larger is the reduction of the electoral cycle; 3) before the reform were implemented, the diffusion of newspapers constrained the increased size of expenditures by reducing the positive variation of capital expenditures; 4) after the reform were implemented, the diffusion of newspapers leaves unaffected the size of expenditures by reducing both the positive variation of capital expenditures and the negative variation of current expenditures. The empirical analysis confirms the expectations; the results, moreover, are robust to alternative categorizations of the press and indicate a larger effectiveness of the diffusion of local press.

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  • Petrarca, Ilaria, 2014. "No news is costly news: The link between the diffusion of the press and public spending," European Journal of Political Economy, Elsevier, vol. 34(C), pages 68-85.
    • Handle: RePEc:eee:poleco:v:34:y:2014:i:c:p:68-85
    DOI: 10.1016/j.ejpoleco.2014.01.002
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    2. Francesco Prota & Maria Jennifer Grisorio, 2018. "Public expenditure in time of crisis: are Italian policymakers choosing the right mix?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 337-365, August.
    3. Gratton, Gabriele, 2015. "The sound of silence: Political accountability and libel law," European Journal of Political Economy, Elsevier, vol. 37(C), pages 266-279.

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    More about this item

    Keywords

    Local diffusion of newspapers; Expenditure composition; Electoral expenditure cycles; Dynamic panel estimation;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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