Sectoral Media Focus and Aggregate Fluctuations
AbstractWe formalize the editorial role of news media in a multisector economy and show that media can be an independent source of business cycle fluctuations, even when they report accurate information. Public reporting about a subset of sectoral developments that are newsworthy but unrepresentative causes firms across all sectors to hire too much or too little labor. We construct historical measures of US sectoral news coverage and use them to calibrate our model. Time-varying media focus generates demand-like fluctuations that are orthogonal to productivity, even in the absence of non-TFP shocks. Presented with historical sectoral productivity, the model reproduces the 2009 Great Recession.
CitationChahrour, Ryan, Kristoffer Nimark, and Stefan Pitschner. 2021. "Sectoral Media Focus and Aggregate Fluctuations." American Economic Review, 111 (12): 3872-3922. DOI: 10.1257/aer.20191895
- D22 Firm Behavior: Empirical Analysis
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- E32 Business Fluctuations; Cycles
- L82 Entertainment; Media