Mass Media, Election Control, and the Economy

Résumé

In this paper I embed politically motivated media in a political business cycle model where taxes and spending in the provision of two public goods must be set in order to meet a balanced-budget condition, elections are held every other period, and there is technological uncertainty in the production of the public goods. Uncertainty originates in the head of government's (the incumbent) competency level, which is not observed by voters. There is a superiorly informed agent (the media) able to elicit with some probability a perfectly correlated signal about this competency shock. This agent is also able to spread this information across the polity. Yet, due to political preferences that are independent of the politician's skill in power, this agent might find in her best interest to withhold information when found, in order to alter the electoral outcome at the polling station in favour of those preferences. There is a range for the parameters considered in this model for which there is manipulation of agents' beliefs about the incumbent's capacity in manoeuvring the economy, in spite of all agents being fully rational and in spite of all of them knowing how strong the informed agent's preference for or against the incumbent is. As an important aside, we are able to find a new theoretical micro-founded model for Political Business Cycles. Manipulation over both election outcomes and the economy, however, is limited by pluralism and voters' skepticism.Keywords. Equilibrium Political Business Cycles, Expert Advice, Belief Manipula- tion, Technological Uncertainty, Media Bias, Public Information, Political Accountability, Electoral Control, Strategic Information Transmission.