Sales and advertising with spillovers at the firm level: estimation of a dynamic structural model on panel data

Emmanuel Duguet and Nicolas Iung
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Nicolas Iung: INSEE - Division Marchés et Stratégies d'Entreprises

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: The aim of this paper is to study the relationship between advertising and sales of French manufacturing firms. First, we use a simple theoretical model compatible with past econometric studies of sales and advertising and extend it to dynamics. We show that the models that do not account for the dynamic features of advertising lead to overstate the impact that advertising has on sales. Second, we estimate our model while accounting for the main problems encountered in the previous econometric studies: simultaneity between sales and advertising and fixed effects, using the generalized method of moments. We use new data on advertising expenditures for 4882 firms over 1988-1994. We find that advertising allows for product differentiation in some industries, that advertising by competitors always has a non-negative effect on own sales and that the depreciation of advertising is higher than suggested in previous studies, always above 60%

Keywords: sales; advertising; spillovers; goodwill capital; Euler equation; generalized method of moments; panel data; manufacturing (search for similar items in EconPapers)
JEL-codes: C23 D43 D62 D92 L60 (search for similar items in EconPapers)
Pages: 41 pages
Date: 1998-03
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https://shs.hal.science/halshs-04660405 (application/pdf)

Related works:
Working Paper: Sales and Advertising with Spillovers at the Firm Level: Estimation of a Dynamic Structural Model on Panel Data (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:98017

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