Advertising Effects in Presidential Elections

We estimate advertising effects in the context of presidential elections. This setting overcomes many data challenges in previous advertising studies, while arguably providing one of the most interesting empirical settings to study advertising's effects. The four-year presidential election cycle facilitates measurement in two ways. First, the gap between elections depreciates past advertising stocks such that large advertising investments are concentrated within relatively short periods. Second, the lack of political advertising between elections allows lagged advertising prices to serve as instruments that are safely independent of candidates' current advertising choices. To further aid estimation, the winner-take-all nature of the electoral college generates broad variation in advertising levels across states. We analyze the data using an aggregate discrete choice approach with extensive fixed effects at the party-market level to control for unobservable cross-sectional factors that might be correlated with advertising, outcomes, and instruments. The results indicate significant positive effects of advertising exposures for the 2000 and 2004 general elections. Advertising elasticities are smaller than are typical for branded goods, yet significant enough to shift election outcomes. For example, if advertising were set to zero and all other factors held constant, three states' electoral votes would have changed parties in 2000, leading to a different president.