Advertising in demand systems: testing a Galbraithian hypothesis

In this paper we argue that the influence of advertising upon the inter-product distribution of demand is a system-wide phenomenon which is investigated better through a demand equation system rather than through single equation methods. Attention is focused upon a dynamic version of Deaton Muellbauer's AIDS model modified to include advertising terms. Within this framework using data on consumer's non-durable expenditure in the UK we carry out a preliminary test of Galbraith' hypothesis that advertising may affect the composition of aggregate consumer demand.