Advertising is expensive and thus raises the cost of goods, but it may encourage competition that keeps prices down. This column addresses the old question with data from a natural experiment brought about by tax harmonisation in Austria. It argues that on average advertising decreases consumer prices and estimates that if the 5% tax were abolished, consumer prices would decrease by about 0.25 percentage points.
Ferdinand Rauch, 13 November 2012
Jesse Cunha, Giacomo De Giorgi, Seema Jayachandran, 26 September 2011
Should governments pay entitlements in cash or in kind to help reduce poverty? The authors of CEPR DP8581 find that cash transfers increase prices, especially in remote areas where the poorest consumers often live. In-kind transfers lower local prices, helping consumers at the expense of producers with a benefit equal to 11% of value of the transfer.
Christian Broda, 03 July 2008
Conventional wisdom says globalisation has increased US income inequality. This column says that is dead wrong, as China and Wal-Mart have increased the purchasing power of the poor more than the rich.
Orley Ashenfelter, Daniel Hosken, 22 April 2008
US antitrust authorities block very few mergers. This column presents estimates of the consumer price impact of five large mergers that were allowed. Prices increased, providing one piece of evidence to support those who say US antitrust authorities are too acquiescent.