Working papers

The Political Economy of Alternative Realities (with Adam Szeidl), R&R at the American Economic Review

We build a model in which a politician can persuade voters of a false alternative reality that serves to discredit the intellectual elite. In the alternative reality, elite members conspire to criticize the competence of a politician whose ideology they dislike. If believed, the alternative reality inverts the effect of the elite's message, so that criticism helps the politician. This force leads to reduced accountability, distrust in experts, and bad policies that invite elite criticism. Alternative realities feature conspiracies which solve a collective action problem, evolve in response to evidence, and create demand for new media that reinforce them.

Equilibrium Response to Corruption Charges (with Bence Hamrak and Gabor Simonovits), R&R at the European Review of Political Economy

While politicians involved in various scandals typically deny charges, the impact of elite communication in this context is unclear. If guilty incumbents also tend to deny accusations, then rational voters should realize this and discount such messages as cheap talk. In this paper, we present a formal model in which elite communication and voters' beliefs during a political scandal emerge as an equilibrium, determined by the severity of the accusations and the ability of the media to collect evidence. The prediction of our model is that incumbents are able to use denials to garner support even when they face the possibility of evidence showing their guilt. In contrast, public apologies increase approval only when accusations are not very serious and are likely to be proven. Results from a large survey experiment randomizing the severity of charges, elite communication as well as the availability of evidence corroborate these predictions. Using an approach novel to the analysis of experiments we also use our data to estimate the structural parameters of our model and conduct counterfactual simulations. We find that increasing media scrutiny leads to asymmetric effects on incumbent communication with politicians who are the best at covering up evidence actually benefiting from increased scrutiny.

Forthcoming or Published Papers

Discretion and Favoritism in Public Procurement

Journal of the European Economic Association, Vol. 22, No. 1 (February, 2024), 117-160. Online appendix

This paper investigates the consequences of bureaucratic discretion in public procurement. I exploit a Hungarian policy reform, which allows a “high-discretion” procedure below a certain contract value. At the threshold, I document large discontinuities both in procurement outcomes and in the density of contract values, which indicates that buyers manipulate contract values to avoid auctions. I combine the reform and a structural model to find that discretion increases prices and results in the selection of less productive contractors. I also show that high discretion benefits firms with connections to the party of the central government. I use the structural model to document that public buyers are willing to sacrifice more contract value to increase their discretion if more connected firms are operating in the market. I also use the model to simulate the effects of counterfactual procurement thresholds on different procurement outcomes.

Algorithmic Selection and Quality of Political News on Facebook (with Marcel Garz) 

Information Economics and Policy, 62 (March 2023): 101020. 

Facebook has been criticized for exposing its users to low-quality and harmful information, including fake news, hate speech, and politically one-sided content. In December 2013 and again in August 2014, the platform updated its news feed algorithm to increase user exposure to quality content of news publishers, while curbing the proliferation of non-informative posts. This paper uses a sample of German newspapers to investigate the conjecture that these modifications raised the incentives to publish quality news stories on the platform. We construct proxies of quality that focus on the number and diversity of news story posts about substantive political issues. Using the newspapers’ print editions as a counterfactual, our results indicate an increase in the amount of substantive political news on Facebook by approximately 30%. This expansion occurred in a politically balanced way, except that the outlets disproportionately increased their Facebook coverage of the formerly underrepresented Linke (Left Party). Consequently, the degree of within-outlet political diversity increased by about one half of the standard deviation of our diversity indices. Complementary survey data suggest that Facebook users’ political knowledge, interest, and turnout grew after the algorithm updates.

Media Capture through Favor Exchange  (with Adam Szeidl) 

Econometrica, Vol. 89, No. 1 (January, 2021), 281–310. Online appendix 

We use data from Hungary to establish two results about the relationship between the government and the media. (1) We document large advertising favors from the government to connected media, and large corruption coverage favors from connected media to the government. Our empirical strategy exploits sharp reallocations around changes in media ownership and other events to rule out market-based explanations. (2) Under the assumptions of a structural model, we distinguish between owner ideology and favor exchange as the mechanism driving favors. We estimate our model exploiting within-owner changes in coverage for identification and find that both mechanisms are important. These results imply that targeted government advertising can meaningfully influence content. Counterfactuals show that targeted advertising can also influence owner ideology, by making media ownership more profitable to pro-government connected investors. Our results are consistent with qualitative evidence from many democracies and suggest that government advertising affects media content worldwide.

Book chapters

Media capture and belief in alternative realities, in Razin, A (eds), The Transition to Illiberal Democracy Economic Drivers and Consequences, CEPR Press, Paris & London. 2024 

Work in progress

Facing the Hard Truth: Evidence from Climate Change Ignorance (with Pamela Campa)

Public ignorance around climate change remains high in many countries, including the United States, where in 2019 only 67% of adults reported to believe that global warming is happening. In this paper, we show that information avoidance aimed at protecting identity contributes to explaining climate ignorance. Exploiting mass layoffs of coal miners in the US and a difference-in-differences design we find that climate ignorance shrinks less in counties affected by the layoffs as compared to other coal-mining counties. An instrumental variable strategy that uses geographic variation in gas prices to predict mine closures strongly suggests that layoffs causally impact beliefs about climate change. We also employ a triple difference-in-differences strategy that compares layoffs from coal and metal mines to understand the underlying causes of persistent climate change ignorance in communities experiencing layoffs. Our triple difference results confirm that information avoidance is specific to coal-mining communities suggesting that protecting identity plays an important role.  

What's going on in the smoke-filled room? Political Motives in the Monopolization of Hungarian Tobacco Shops 

I present evidence on political motivations behind the monopolization of tobacco retail market in Hungary. I show that local politicians aligned with the government had a higher chance to obtain tobacco licenses than their opposition counterparts. To rule out productivity explanations, I compare this premium to a non-regulated benchmark. I also provide evidence on the importance of mayors in mobilizing voters for parliamentary elections. These two results together suggest that favor exchange exists between central and local politicians, where the central government creates rents for its local supporters to incentivize campaigning efforts. 

Welfare costs of misallocating government contracts (with Miklos Koren, Adam Szeidl, and Balazs Vedres)