Air Pollution and Advertising Spending: Causal Evidence from an Emerging Market
Air Pollution and Advertising Spending: Causal Evidence from an Emerging Market
Ce (Matthew) Shi, Peng Zhang
Year of Publishing:
Working Paper

While air pollution has tremendous impacts on many aspects of the economy, little is known about how pollution affects marketing activities. We provide the first study on the causal effect of air pollution on advertising markets. Taking an instrumental variable approach by exploiting the meteorological phenomenon of thermal inversions and using monthly data from 24 mega-cities in China for 10 years (2008-2017), we find that air pollution has a significant market-wide impact on outdoor advertising spending. Specifically, a 10 unit (30% of one standard deviation) increase in the same month's average fine particulate matter (PM2.5) concentration reduces monthly outdoor advertising spending by 2.5% or CNY 2.1 million per city. Consistent with the consumer exposure effect that air pollution reduces consumers' outdoor activities and consumption trips, the adverse effect of air pollution is more pronounced on advertising in residential and shopping areas than in work-related areas, such as industrial and government districts. Moreover, we do not find any significant effect of air pollution on newspaper advertising. Our study offers a novel perspective to understand the impact of environmental changes on consumer attention and the media landscape.

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