Sales and Advertising with Spillovers at the Firm Level: Estimation of a Dynamic Structural Model on Panel Data

The aim of this paper is to study the relationship between advertising and sales of French manufacturing firms. First, we use a simple theoretical model compatible with past econometric studies of sales and advertising, and extend it to dynamics. We show that the models that do not account for the dynamic features of advertising lead to overstate the impact that advertising has on sales. Second, we estimate our model while accounting for the main problems encountered in the previous econometric studies: simultaneity between sales and advertising and fixed effects, using the generalized method of moments.