Economic Issues in Cigarette and Alcohol Advertising

Abstract

The effects of advertising on cigarette and alcohol consumption are controversial, and research on the subject has produced mixed results. An economic theory underlying the general relationship between advertising and consumption can help explain what type of data is needed to study this question. Studies that use national data on annual advertising expenditures measure advertising at a high level with little yearly change and are likely to find no effect on consumption. In contrast, studies that use local-level data measured over the course of a year find wide variation in the level of advertising and are likely to conclude that advertising increases consumption. To mitigate consumption increases, some countries and localities have tested advertising bans or counteradvertising campaigns. Studies of advertising bans show a decrease in consumption to some degree when intervening factors are controlled. Counteradvertising likewise is found to reduce consumption. Policymakers can choose from various combinations of advertising bans, counteradvertising, and advertising taxation to curb consumption.