32 Pages Posted: 7 Nov 2006
Date Written: October 2006
This paper uses cross-country panel data to study the effects of advertising bans and other control policies on alcohol demand. The null hypothesis to be tested is that advertising bans do not decrease alcohol consumption. The study addresses several shortcomings in four previous studies. First, an explanatory variable is included for other alcohol control policies. The control index accounts for fourteen distinct alcohol policies in six major areas. Second, the study examines the history of advertising bans in OECD countries, including the ease of avoidance. Advertising bans are exogenous in the regression models, whereas the control index is endogenous. This result follows in part from policy changes imposed by the European Union. Third, the study also examines differences in cross-country trends that characterize developed countries, including aging of the population, increased tourism, higher unemployment rates, and increased consumption of wine. The Mediterranean wine-drinking countries are shown to be categorically distinct from the beer-drinking countries and Nordic spirits-drinking countries. Fourth, the study examines the panel data for unit roots and employs model specifications that correct for non-stationary data. The empirical results indicate significantly negative results for the control index for other policies and the market price of alcohol. Using alternative model specifications and estimation methods, the null hypothesis is not rejected. The results fail to indicate that advertising bans reduce consumption, which casts doubt on the existence of a market-wide advertising-sales response function.
Keywords: Advertising, Alcohol Consumption, Regulation, Panel Data
JEL Classification: M37, D12, L5, C33
Suggested Citation: Suggested Citation
Nelson, Jon P., Alcohol Advertising Bans, Consumption, and Control Policies in Seventeen OECD Countries, 1975-2000 (October 2006). Available at SSRN: https://ssrn.com/abstract=942647 or http://dx.doi.org/10.2139/ssrn.942647
By Jon Nelson