Advertising, Labor Supply and the Aggregate Economy: A Long Run Analysis

Working Papers 09.16, Universidad Pablo de Olavide, Department of Economics

41 Pages Posted: 7 Jul 2008 Last revised: 18 Jan 2019

See all articles by Benedetto Molinari

Benedetto Molinari

University of Malaga - Dept. of Economics; Rimini Centre for Economic Analysis (RCEA)

Francesco Turino

Università di Bologna Dipartimento di Scienze Economiche; Universidad de Alicante

Date Written: November 15, 2009

Abstract

This paper studies the influence of persuasive advertising in a neoclassical growth model with monopolistically competitive firms. Our findings show that advertising can significantly affect the stationary equilibrium of a model economy in which the labor supply is endogenous. In this case, for empirically plausible calibrations, we find that the equilibrium level of hours worked, GDP, and consumption increase with the amount of resources invested in advertising. These findings are consistent with a new stylized fact provided in this paper: over the past decade, per-capita advertising expenditures have been positively correlated with per-capita output, consumption and hours worked across OECD countries. Because of the connection between advertising and labor supply, we show that our model improves on its neoclassical counterpart in explaining both within-country and cross-country variability of hours worked per capita.

Keywords: Advertising, Labor Wedge, Labor supply, Economic Growth, Hours Worked

JEL Classification: E20, E32, J22

Suggested Citation

Molinari, Benedetto and Turino, Francesco, Advertising, Labor Supply and the Aggregate Economy: A Long Run Analysis (November 15, 2009). Working Papers 09.16, Universidad Pablo de Olavide, Department of Economics . Available at SSRN: https://ssrn.com/abstract=1155466 or http://dx.doi.org/10.2139/ssrn.1155466

Benedetto Molinari

University of Malaga - Dept. of Economics ( email )

Malaga
Spain
+34610941805 (Phone)

Rimini Centre for Economic Analysis (RCEA)

Via Patara, 3
Rimini, RN 47900
Italy

Francesco Turino (Contact Author)

Università di Bologna Dipartimento di Scienze Economiche ( email )

piazza scaravilli 3
Bologna, 40100
Italy

Universidad de Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, Alicante 03690
Spain

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
61
Abstract Views
800
rank
377,700
PlumX Metrics