Advertising and National Consumption: A Path Analytic Re-Examination of the Galbraithian Argument

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Abstract
A relatively new analytic technique, PATHEVAL, is used to re-examine an old issue, the relationship between advertising and national consumption. Using cross-national annual data collected on 53 nations, the authors find little evidence for Galbraith's view of advertising as a most persuasive force in altering people's spending and savings habits. Four variables are included in the path analytic model: national income, energy use — a proxy for industrial development, disposable income, private final consumption, and national advertising expenditures. In the Galbraithian argument, disposable income and industrial development predict to advertising, which leads to consumption. The contentions of Galbraith's critics are supported by the analysis: income appears to lead to consumption, which in turn, leads to advertising.

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