Abstract
This paper empirically assesses the relationship between culture and a free press. The results reveal that a privatized or ‘free media’ strongly influences informal institutions of a country or what is commonly known as culture. By providing unbiased and a wide variety information to the masses, the media sector not only reduces information asymmetry and transaction costs but also helps generate higher levels of social capital. It acts as an effective liaison between the masses and the government and also among various religious, ethnic and other fractionalized groups in a society. We use the proxy of informal institutions identified by Tabellini (Journal of the European Economic Association 8(4):677–716, 2010) which consists of four traits. The results are robust to alternate specifications and inclusion of controls.
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Notes
This fallout is sometimes referred to as cultural erosion or sometimes as cultural gains from trade. While the former blames globalization as robbing cultures off their indigenous traits and emphasizes the negativities, the latter calls it more of a “creative destruction” saying that in the process indigenous cultures evolve and emerge better.
One main argument of the paper is that a free media provides a larger spectrum of information from across the globe leading to creation of an informed citizenry. This is turn act as a catalyst for major institutional change in a country. Our results find support in the arguments of Leeson (2008) (who shows that lower media freedom is associated with poor political knowledge, low political participation as well as low voter turnout), Coyne and Leeson (2004) (where they identify the fact that a free media allowing diverse coverage of both domestic and foreign information, introduces new perspectives to consumers and turns games of conflict into games of coordination), Coyne and Leeson (2009) (who identifies three ways in which a privatized media can bring about institutional change—gradual effect, punctuation effect and reinforcement effect).
As defined by North (1991), institutions are the “rules of the game” or “humanly devised constraints that shape human interaction”. Institutions are created by humans as an attempt to control the uncertain environment and to lower transaction cost. Younas (2009) shows that efficient institutions especially pertaining to the legal system reduce investment risk, ensures democratic accountability and, thus, raises capital mobility in developing nations. Leeson (2005) has explained in his paper that poor institutions transform into lower economic progress in the presence of high level of ethnic fractionalization.
Putnam (2000) has pointed to a different perspective. According to Putnam, media has changed leisure from being a “collective experience” characteristic to being more privatized and reclusive. Since collective leisure leads to a culture of public interaction and generation of trust, the erosion of such behavior might have some implication for social capital.
Banfield (1958) puts forward that the overall development of a society will depend on people’s perceived ‘locus of control’ over economic activity.
Knowles and Weatherston (2006) argues that in a high-trust environment, common pool resources can be managed more efficiently because the norms is such cases should be more successful. Thus, TRUST can definitely be one of the proxies of informal institutions. Also, individuals need to have some degree of self-determination so as to deal with issues, for example, credit schemes. If they leave everything to fate, then efficient informal institutions are less likely to be formulated. Literature has argued that while TRUST, RESPECT and CONTROL are important for social interaction and encourage production and entrepreneurial initiatives, OBEDIENCE negatively affects economic development.
Generalized mortality is consisted of a set of rules which govern interactions across social groups that in turn lead to less opportunistic behavior outside of an individual’s primary social group. The idea of limited mortality implies the absence of general rules and the presence of ‘in-group’ rules (Plattea 2000).
We always need to drop one of the four variables as they all add up to a 100%.
Freedom House maintains qualitative data on press freedom of countries from 1989 onwards.
Several papers have shown these are important factors for growth and development factors of a nation (Glaeser et al. 2004).
Autocracy and democracy are separate indexes in the Polity IV database each of which ranges from 0 to 10 with higher values indicating stronger democratic or autocratic institutions. Polity2 is more efficient to use compared to the autocracy/democracy indexes since it has been corrected for ‘standardized authority scores’ representing periods of transition or interregnum or foreign interruption.
On a closer inspection, we have an interesting analysis. We incorporated an interaction term in our specification. The coefficient of the interaction term of formal institution and press freedom is positive (α 2) and significant while the coefficient of formal institution is negative (α 1). To get a better sense of the impact of formal institution on culture, we consider the partial derivative of culture with respect to formal. The partial derivative is as follows \( \frac{{\delta Culture_{it} }}{{\delta Formal_{it } }} = \alpha_{1} + \alpha_{2} Press Freedom_{it} \). Thus, for lower values of press freedom, formal will have a negative impact on Culture. For higher values of press freedom, the impact will be positive. When we don’t consider the interaction term, the sign of the coefficient of formal can either be negative or positive, depending on whether the distribution is negatively or positively skewed. The results with the interaction term are not reported in the paper since it is not our benchmark specification and would take away from our primary focus. However, we have checked the results and this by itself can be followed up in a separate research.
POLCOMP, XRREG and XCONST are some, among others, component variables which have been used in the construction of democracy and autocracy index.
We run panel specifications with country fixed effects.
The p value generated by running Hausman test confirms that the appropriate model to use is fixed effect.
As stated above, the interaction term for press freedom and formal (polity or economic freedom) is positive and significant here too while the coefficient of formal institution itself is negative.
The threshold is usually considered to be 10. If VIF is above 10, then there is reason to worry.
Polity average is highly correlated with press freedom average and thus, we considered other proxies of formal institutions lagged several periods. The correlation coefficient of press freedom with the lagged variables is within reasonable range.
We also consider a series of questions which seek people’s opinion about the political system of a country. Again the percentages of people who answer ‘very good’ on these questions constitute the score for each category for each country. The questions are ‘having a strong leader’, ‘having experts make decisions’ and ‘having the army rule’. For all the cases, press freedom has a significant negative impact on these indicators. Thus, with greater press freedom people are more conscious and feel very strongly against all these issues.
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Acknowledgments
We are thankful to the Editor, the referee, Peter T. Leeson, Justin Ross and the seminar participants at Southern Economic Association (2009) for indispensable comments and suggestions. The comments and suggestion greatly enhanced our paper.
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Dutta, N., Roy, S. The changing face of culture: gauging the impact of a free media. Eur J Law Econ 36, 95–115 (2013). https://doi.org/10.1007/s10657-011-9261-8
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DOI: https://doi.org/10.1007/s10657-011-9261-8