On the estimation of an advertising-augmented, cointegrating demand system

Abstract

This paper uses cointegration analysis to investigate the long-run effects of advertising and other variables on the aggregate consumption of several product categories, though the main focus is upon the demand for beer, spirits and wine. The well-known Almost Ideal Demand System serves as a framework for the investigation. The implications for public policy of the empirical results would seem to be straightforward. Whilst taxation may restrain consumption of these goods, advertising restrictions are likely to be ineffective. There are limits to taxation, however, and advertising effects need to be researched further.