Newspapers and Parties: How Advertising Revenues Created an Independent

The source of media revenues is an important determinant of media behavior. News coverage depends on the preferences of those who pay the costs. I argue that higher potential advertising revenues increase the value of news outlet’s audience and thus decrease political media bias. I use data on 19th century American newspapers to test the model, showing that there were more independent newspapers in counties with high advertising rates. The effect of advertising works through both the entry of new newspapers and changes of affiliation of old newspapers. The data do not confirm the hypothesis that the exit of independent newspapers was related to county’s advertising rates. Finally, I show that independent newspapers had larger circulation than partisan ones. ∗I am indebted to Jeffry Frieden and Kenneth Shepsle for their guidance and useful comments. I am also grateful to Attila Ambrus