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The Relationship between Advertising and Consumption

Author

Listed:
  • Marco GAMBARO

    ()

  • Tong WANG

    ()

Abstract

This paper investigates the causal relationship between advertising and consumption with panel data at industry level for some European countries. At macroeconomic level consumption can rise only if saving will decrease. But the competition effect of advertising is better captured at industry level that allow for interaction between firms. We apply a panel Granger causality framework to our unique data set of consumption and advertising spending on different sectors across 9 years for 5 European Union countries. We reach robust results showing that consumption Granger causes advertising, rather than the other way. Our findings also suggest that compared to economic structures of different countries and interactions of sectors, consumption is a more important driver to advertising.

Suggested Citation

  • Marco GAMBARO & Tong WANG, 2019. "The Relationship between Advertising and Consumption," Departmental Working Papers 2019-07, Department of Economics, Management and Quantitative Methods at Universit√† degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2019-07
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    File URL: http://wp.demm.unimi.it/files/wp/2019/DEMM-2019_07wp.pdf
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    More about this item

    Keywords

    Consumption; Advertising; Granger causality; Panel data; Media;

    JEL classification:

    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L8 - Industrial Organization - - Industry Studies: Services

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