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Research Roundup 6: Make Your Voice Heard

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It’s almost that most patriotic time of the year when Americans perform their civic duty, gather together, celebrate their support for one of two teams, and huddle around a TV anxiously awaiting the results: The Super Bowl[1] Election Day.[2] Regardless of what you believe, or who you believe in, The Super Bowl Election Day is your chance to make your voice heard and bond with your fellow citizens, because in the end, no matter the outcome, we all still live in this great nation called America. Unless some people decide to leave.[3] In either event, this edition of the Roundup is tailored to technologies that can empower users. Whether that is Twitter making it easier for people to learn about new political candidates, advertising-supported new media adding value to the economy and consumers’ lives, crowdfunding platforms democratizing product launches, or even privacy policy, in this Roundup, the power is yours.[4]

 

Social Media and Political Donations: New Technology and Incumbency Advantage in the United States

Valuing “Free” Media in GDP: An Experimental Approach

Crowdfunding Platforms: The Role of Information Providers

Simplifications of Privacy Disclosures: An Experimental Test

 

As a reminder, while the power is yours, the views expressed here are not necessarily ours.

 

Social Media and Political Donations: New Technology and Incumbency Advantage in the United States

Petrova, Maria and Sen, Ananya and Yildirim, Pinar, Social Media and Political Donations: New Technology and Incumbency Advantage in the United States (September 8, 2016).

In the US political system, incumbents have the advantage when it comes to re-election. Authors Petrova, Sen, and Yildirim attempt to discover if social media exposure, in particular Twitter, can help challengers overcome that advantage in political races. Social media can provide a low-cost ability to reach a broad audience and quickly spread a candidate’s message without the need for detailed voter-registration lists that can take years to build. It is potentially this increased presence that might lead to an uptick in donations for candidates.

The authors test four hypotheses:

  1. Politicians, on average, might generate more donations by joining Twitter since it serves as an additional channel of communication.
  2. New, relatively unknown, politicians have more to gain from joining Twitter than more experienced politicians.
  3. Politicians who tweet more informatively will benefit more from the platform.
  4. Politicians are likely to stimulate more donations through Twitter the higher the Twitter penetration in a given area.

They compare campaign donations for candidates who create a Twitter profile during an election to the House or Senate, both before and after account creation. They adjust for Twitter market penetration by state, and look only at donations directly to a candidate under $1000, as larger donations are likely to be for other reasons. The authors also adjust for relative media exposure before joining Twitter. In order to ensure that any spike in donations is not related to other campaign activities that coincidentally simultaneously occur alongside joining Twitter, the authors also control for campaign expenditures and politician-month fixed effects. If their hypotheses are correct, the interaction between joining Twitter and Twitter penetration by state should be significant and positive.

The findings seem to validate the authors’ hypotheses, as areas that have little to no Twitter penetration do not see an uptick in campaign contributions when candidates join, while higher Twitter penetration in a state leads to more campaign contributions. The effect is larger for new candidates (candidates that have never run for political office before), raising 2.6% more than average when first joining Twitter, compared to 1.6% for all politicians. The authors also ensured that Twitter penetration is independent of possible predictors like race, age, gender, socioeconomic status, or voting history.

The authors theorize that the reason behind increased campaign contributions is that information about new candidates galvanizes support among those who have never donated, as these first time donors finally find a candidate who resonates with them. Data supports this hypothesis, as new donors (those who have never donated to a particular candidate before) increase donations only to new candidates; existing donors do not increase donations at all. Likewise, new candidates who use Twitter see an increase in donations compared to experienced candidates with the same Twitter activity, consistent with the hypothesis that increased information exposure drives donations.

Overall, the authors believe the link between new candidates receiving more donations after joining Twitter demonstrates its potential role in helping less popular candidates who may not have the resources or media savvy of their more experienced incumbent rivals spread their message, thereby increasing voter awareness of candidates.

 

AUTHOR WRITTEN ABSTRACTS:

 

Social Media and Political Donations: New Technology and Incumbency Advantage in the United States

Petrova, Maria and Sen, Ananya and Yildirim, Pinar, Social Media and Political Donations: New Technology and Incumbency Advantage in the United States (September 8, 2016).

Do new technologies change the way political markets work in a democracy? We study the impact of adopting a new technology on campaign contributions received by candidates running for the U.S. Congress. To identify the causal impact of joining Twitter, we compare donations just before and just after politicians open an account in regions with high and low levels of Twitter penetration, controlling for politician-month fixed effects. We estimate that opening a Twitter account amounts to an increase of at least 2-3% percent in donations per campaign. Moreover, this effect holds only for inexperienced politicians who have never been elected to the Congress before. Placebo checks suggest that this impact is not driven by concurrent increase in information about these politicians in newspapers or blogs, TV ads, or campaign expenditures. The gain from opening a Twitter account is stronger for donations coming from new as opposed to repeat donors, for politicians who tweet more informatively, and for politicians from regions with lower newspaper circulation. Overall, our findings suggest that a new communication technology can lower the barriers to entry in political contests by increasing new politicians’ opportunities of informing voters and fund-raising.

 

Valuing “Free” Media in GDP: An Experimental Approach

Nakamura, Leonard I. and Samuels, Jon D. and Soloveichik, Rachel H., Valuing ‘Free’ Media in GDP: An Experimental Approach (2016-08-05). FRB of Philadelphia Working Paper No. 16-24.

“Free” consumer entertainment and information from the Internet, largely supported by advertising revenues, has had a major impact on consumer behavior. Some economists believe that measured gross domestic product (GDP) growth is badly underestimated because GDP excludes online entertainment (Brynjolfsson and Oh 2012; Ito 2013; Aeppel 2015). This paper introduces an experimental GDP methodology that includes advertising-supported media in both final output and business inputs. For example, Google Maps would be counted as final output when it is used by a consumer to plan vacation driving routes. On the other hand, the same website would be counted as a business input when it is used by a pizza restaurant to plan delivery routes. Contrary to critics of the U.S. Bureau of Economic Analysis (BEA), the process of including “free” media in the input-output accounts has little impact on either GDP or total factor productivity (TFP). Between 1998 and 2012, measured nominal GDP growth falls 0.005% per year, real GDP growth rises 0.009% per year and TFP growth rises 0.016% per year. Between 1929 and 1998, measured nominal GDP growth rises 0.002% per year, real GDP growth falls 0.002% per year, and TFP growth rises 0.004% per year. These changes are not nearly enough to reverse the recent slowdown in growth. Our method for accounting for free media is production oriented in the sense that it is a measure of the resource input into the entertainment (or other content) of the medium rather than a measure of the consumer surplus arising from the content. The BEA uses a similar production-oriented approach when measuring GDP. In contrast, other researchers use broader approaches to measure value. Brynjolfsson and Oh (2012) attempt to capture some consumer surplus by measuring the time expended on the Internet. Varian (2009) argues that much of the value of the Internet is in time saving, an additional metric for capturing consumer surplus. The McKinsey Institute (Bughin et al. 2011) attempts to measure the productivity gain from search directly. In particular, this production-oriented accounting has no method to account for instances in which the good or service precedes the revenue that it eventually generates. Over the past two decades, many Silicon Valley firms have followed the disruptive business model described as URL: ubiquity now, revenue later. Some firms have been creating proprietary software or research, which is already captured in the national accounts as investment. Other firms have been creating intangible investments in open source software, customer networks and other organizational capital. Despite their long-run value, none of these intangible assets are currently captured in the national accounts as investment. If we treat these asset categories as capital, then the productivity boom from 1995 to 2000 becomes even stronger and the weak productivity growth of the past decade may be ameliorated somewhat.

 

Crowdfunding Platforms: The Role of Information Providers

Wu, Zhenhua and Lin, Zhijie and Tan, Yong, Crowdfunding Platforms: The Role of Information Providers (August 31, 2016).

Despite the popular emergence of crowdfunding platforms, relevant research investigating the role of these platforms in crowdfunding markets still lags. In this paper, we present a model to study market incentives of crowdfunding platforms’ optimal information reporting strategy when there exists uncertainty on projects’ returns. We assume that platforms on the market are rational players, and they seek to stay on the market as long as possible as accurate information providers. We characterize platforms’ equilibrium reporting strategies under different market conditions. Surprisingly, we find that under certain conditions, the potential competition from a new entrant gives the incumbent crowdfunding platform an incentive to bias the information on borrowers’ risky projects. However, the uncertainty resolution provided by a third party (e.g., regulator, media) could reduce the incentive. Our findings contribute to the literature on crowdfunding by analyzing platform decisions, and offer policy implications for the regulations of crowdfunding markets.

 

Simplifications of Privacy Disclosures: An Experimental Test

Ben-Shahar, Omri and Chilton, Adam S., Simplification of Privacy Disclosures: An Experimental Test (April 13, 2016). University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 737.

Simplification of disclosures is widely regarded as an important goal and is increasingly mandated in a variety of areas. In the area of data privacy, lawmakers and interest groups developed “Best Practices” techniques to help consumers understand how firms collect and use personal information. Commentators have even advocated going a step further and using simpler disclosures — warning boxes that alert consumers to the least expected elements. But do these techniques succeed in better informing consumers or preventing unwise behavior? To answer this question, we engaged a leading market research firm to conduct a survey on risky sexual behaviors while randomizing the format of the privacy disclosures provided to the respondents. The results of the experiment suggest that best practices simplification techniques and warning boxes do not have the intended effects. We find little or no change in respondents’: (1) comprehension of the disclosure; (2) willingness to share personal information; and (3) expectations about their rights. Our results challenge the wisdom of focusing regulatory effort on simplifying disclosures.

 

 

[1] Approximately 111 million people watched the 2012 Super Bowl. http://www.ibtimes.com/how-many-people-watched-super-bowl-406406

[2] Approximately 126 million people voted in the 2012 elections. http://bipartisanpolicy.org/library/2012-voter-turnout/

[3] http://cbiftrumpwins.com/#intro

[4] https://www.youtube.com/watch?v=0BhGGe_RBmY#t=55