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Advertising, Consumption and Economic Growth: An Empirical Investigation

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  • Rehme, Günther
  • Weisser, Sara-Frederike

Abstract

It is sometimes argued that more advertising raises consumption which in turn stimulates output and so economic growth. We test this hypothe- sis using annual German data expressed in terms of GDP for the period 1950-2000. We find that advertising does not Granger-cause growth but Granger-causes consumption. Consumption, in turn, Granger-causes GDP growth. The data imply that the immediate impact of more advertising on consumption is positive. However, the long-run effect is negative. Further- more, the immediate impact of higher consumption on growth is negative. But the long-run effect is positive. These results raise interesting questions for standard theory, political debates and advertising practioners.

Suggested Citation

  • Rehme, Günther & Weisser, Sara-Frederike, 2007. "Advertising, Consumption and Economic Growth: An Empirical Investigation," Darmstadt Discussion Papers in Economics 178, Darmstadt University of Technology, Department of Law and Economics.
    • Handle: RePEc:zbw:darddp:dar_35975
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    References listed on IDEAS

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    Cited by:

    1. Benedetto Molinari & Francesco Turino, 2009. "Advertising, Labor Supply and the Aggregate Economy. A long run Analysis," Working Papers 09.16, Universidad Pablo de Olavide, Department of Economics.

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    More about this item

    Keywords

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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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