ADVERTISING AND ECONOMIC GROWTH: A TIME SERIES COMPARISON OF RADIO, TELEVISION, AND INTERNET ADVERTISING IN THE UNITED STATES

Abstract

The purpose of this study is to compare the relationship between advertising’s share of GDP and economic growth (percentage change in GDP) across different technological mediums and different time periods throughout United States history. The technologies examined are radio advertising from 1940 to 1950 (Radio Era), television advertising from 1955 to 1965 (TV Era), and Internet advertising from 1997 to 2007 (Internet Era). These years were chosen as the periods when advertising using these technologies was still emerging yet prominent in the United States. Using an endogenous growth model with time fixed effects, results indicate a significant positive correlation between radio advertising share and economic growth (coefficient of 2728.452, significance level of 0.083), and aggregate advertising share and economic growth (coefficient of 136.864, significance level of 0.081), for a given year in the Radio Era. However, results show no significant correlations between television advertising share and economic growth for a given year in the TV Era, Internet advertising share and economic growth for a given year in the Internet Era, and aggregate advertising share and economic growth for a given year in both eras. This study contributes to the previous literature by recognizing these differences in relationships, significant or not, across the different technologies and time periods.