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Advertising's Unintended Consequence

D. A. Kopf, I. M. Torres, Carl E. Enomoto
Published 2011 · Economics

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The purpose of our study is to explore what relationship, if any, exists between advertising and economic growth. Endogenous growth theory (Romer 1990) is proposed as a possible solution to this 50-year debate. Using endogenous growth theory, we develop a model that links advertising to incentives for business innovation and for overall levels of information and knowledge in society. Results indicate that advertising expenditures offer significant explanatory power for long-term economic growth for a panel of 64 countries. This study contributes to the debate in two major ways: (1) by empirically showing that on a macrolevel, advertising expenditures and economic growth are related; and (2) by developing a theoretical economic growth model that demonstrates that not only are advertising expenditures related to economic growth, but that they can bring about economic growth. Finally, by providing a refinement of how marketing actions may positively affect the economy, the study contributes to the broader debate of advertising's role in society.
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