The economic importance of advertising

published as DIW Berlin – Politikberatung kompakt 115

DIW Econ was commissioned by the Zentralverband der deutschen Werbewirtschaft ZAW e.V. (Central Association of the German Advertising Industry) and the Gesamtverband Kommunikationsagenturen GWA e.V. (General Association of Communications Agencies) to investigate the economic significance of advertising. By providing information, advertising has an economic significance that goes beyond its role as a communication tool for companies. The present study shows this based on a comprehensive empirical analysis of advertising and its effects on market activity in Germany.

The main findings are:

  • Advertising serves to build reputation and brand capital. In this way, high-quality products can be clearly distinguished from competing products. This, in turn, is a prerequisite for offering high-quality products on the market.
  • Advertising enables innovative products to be successfully placed on the market. In this way, the possibility of advertising also strengthens incentives for innovation.
  • By building up reputation and brand capital and securing high-quality, innovative offers, advertising also strengthens growth at macroeconomic level. For the first time, the empirical analysis can show with cogency that advertising expenditure promotes the growth of the gross domestic product (GDP). Thus, an increase in advertising expenses relative to GDP by one per cent triggers a growth impulse of about 0.02 percentage points on average.

Link to press release of the ZAW

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