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The war for consumers’ minds and wallets: state vs. industry responses on cigarette and petroleum consumption
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics. (Centre for Environmental and Resource Economics; Graduate School in Population Dynamics and Public Policy)ORCID iD: 0000-0003-0831-5886
2014 (English)Report (Other academic)
Abstract [en]

The main objective of this article is to examine the empirical effect of state and industry responses on consumption of cigarettes and petroleum in the United States from 1998-2012. Upon facing consumption choices, the consumer faces two competing sets of messages, one from the government and another from the industry. The objective of the state is to steer consumption in the right direction due to the harmful effects from consumption and asymmetric information among consumers. This is done mainly via taxation and state media expenditures. The industry, on the other hand, seeks to incentivize the public to ignore or reject state research and signals as well as maximizing net economic returns. This is mainly done via industry media and lobbying expenditures. We find that the main results indicate, for cigarettes, industrial media and lobbying expenditure is statistically significant on consumption. For petroleum, we find that producer prices, state media expenditure, and industrial lobbying expenditure are statistically significant on consumption. While significant results are mainly seen for media and lobbying expenditures, no significant results are seen for taxation.

Place, publisher, year, edition, pages
2014. , 26 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 894
Series
CERE Working papers, 2014:5
Keyword [en]
advertising, consumption, lobbying, prices, taxation, vector error correction model
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-93348ISBN: 978-91-7601-126-3 (print)OAI: oai:DiVA.org:umu-93348DiVA: diva2:747903
Note

This article is the third of three articles included in the doctoral thesis, "State and Industrial Actions to Influence Consumer Behavior".

Available from: 2014-09-17 Created: 2014-09-17 Last updated: 2014-09-19Bibliographically approved
In thesis
1. State and industrial actions to influence consumer behavior
Open this publication in new window or tab >>State and industrial actions to influence consumer behavior
2014 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of an introductory part and three papers.

Paper [I] examines how taxes affect consumption of commodities that are detrimental to health and the environment. Specifically, this paper examines if a tax increase leads to a significantly larger change in consumption than a producer price change, which is referred to as the signaling effect from taxation. The analysis uses aggregated cross-sectional time series data and information on major legislation introductions in Sweden, Denmark and the United Kingdom from 1970 to 2009. We find the main result to be that the signaling effect is significant for “Electricity” in Sweden and Denmark and significant for “Electricity” and “Petrol” in the United Kingdom.

Paper [II] examines how sin taxation changes long-term consumer behavior regarding commodities which are deemed harmful for both health and the environment. These include tobacco, alcoholic beverages, sugar and confectionary, household energy, and motor fuel. Specifically, we examine the signaling effect from taxation which is seen if a tax increase leads to a significantly larger change in consumption than a producer price change. The empirical analysis is conducted by a US panel data study, during the period 1988-2012 for the four US census regions, using the Almost Ideal Demand System (AIDS). We find the main result to be that the signaling effect from taxation is significant for tobacco as well as for electricity and motor fuel.   

Paper [III] examines state and industry responses on consumption of cigarettes and petroleum in the United States from 1998-2012. Upon facing consumption choices, the consumer faces two competing sets of messages, one from the government and another from the industry. The objective of the state is to steer consumption in the right direction due to the harmful effects from consumption and asymmetric information among consumers. This is done mainly via taxation and state media expenditures. The industry, on the other hand, seeks to incentivize the public to ignore or reject state research and signals as well as maximizing net economic returns. This is mainly done via industry media and lobbying expenditures. We find that the main results indicate, for cigarettes, industrial media and lobbying expenditure is statistically significant on consumption. For petroleum, we find that producer prices, state media expenditure, and industrial lobbying expenditure are statistically significant on consumption.

Place, publisher, year, edition, pages
Umeå: Department of Economics, Umeå University, 2014. 21 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 894
Keyword
Taxation, legislation, regulation, health, environment, tobacco, alcohol, petroleum; electricity; gas; sugar; consumption; prices; signaling effect; almost ideal demand system; public policy, panel data, media expenditure, lobbying, vector error correction model
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:umu:diva-93334 (URN)978-91-7601-126-3 (ISBN)
Public defence
2014-10-10, S213h, Samhällsvetarhuset, Umeå, 13:00 (English)
Opponent
Supervisors
Available from: 2014-09-19 Created: 2014-09-17 Last updated: 2014-09-19Bibliographically approved

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Brockwell, Erik

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Citation style
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