Local news monopolies increase misperceptions about immigration.

We examine how local news monopolies affect misperceptions about the size of the immigrant population in Germany. We propose a theoretical framework in which het- erogeneous information from different local news outlets diffuses through social interactions. We posit that indirect exposure to information from multiple sources leads to more accurate beliefs in competitive markets. To causally identify the effect of local news monopolies on misperceptions, we exploit overlapping newspaper coverage areas as a source of exogenous variation in the number of available outlets. We estimate that local news monopolies increase misperceptions about the size of the local immigrant population by about four percentage points. We demonstrate that the effect of media monopolies hinges on social interactions. For individuals with fewer close social contacts, misperceptions remain unaffected by local news monopolies. Our results suggest that consolidation in the market for news decreases constituents' knowledge about critical policy issues. [ABSTRACT FROM AUTHOR]