Economics and Politics of Advertising: Evidence from the Enlarging European Union

Abstract

There is arguably an optimum amount of advertising that an economy can absorb. A company's ad spending in an economy is a function of a host of economic and geopolitical factors. Regional economic integrations bring a significant transformation in these factors, which in turn influence advertising. We employed random effect time series cross section (TSCS) models and cross sectional regressions to investigate the impacts of economic and political factors on advertising industry in the enlarging EU. We found that marketers' ad spending decisions in these economies are driven by consumers' income level and FDI inflow. Civil liberty variable, on the other hand, was found to moderate the relationship between income and ad spending.

Keywords: Advertising, enlarging EU, civil liberty, market economy

JEL Classification: C12, M31