Jiekai Zhang (Hanken School of Economics) – Environmental Impacts of Banning Vehicle Advertising

This article evaluates the environmental impacts of vehicle advertising bans. We develop a structural model of demand and pricing of vehicles which incorporates the effect of advertising. The model allows for heterogeneity in advertising exposure and advertising spillover effects within and across brands. We estimate this model using rich data on sales and advertising at the demographic-group and product level from 2012-2021 in France. Results suggest that advertising has a significant positive effect on vehicle sales and reduces consumers’ price sensitivity. Compared to environmental taxation and subsidy measures, the effect of advertising is much stronger on sales, but less significant on prices. Counterfactual simulations show that an outright ban on advertising does not necessarily lead to positive environmental effects. Targeted bans on advertising for polluting vehicles are more efficient in achieving this goal.