|Title:||The recent growth of the internet and changes in household-level demand for entertainment|
|Citation:||Hong, S. H. (2007). The recent growth of the internet and changes in household-level demand for entertainment. Information Economics and Policy, 19(3), 304-318.|
|Key Related Studies:|
|About the Data|
|Data Description:||The main data for the study are drawn from the 1996–2002 Interview surveys of the consumer expenditure survey (CEX) by the US Bureau of Labor Statistics (BLS). The CEX consists of random samples of households designed to be representative of the total US population. It is a repeated cross-section containing quarterly expenditures on various items.|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
This paper investigates whether the recent growth of the Internet complements or substitutes for consumption of existing entertainment goods. Applying a difference-in-differences approach to the Consumer Expenditure Survey, I find varying degrees of potential substitutability between Internet growth and consumer expenditures across different entertainment goods. For most goods, these negative effects appear to be sensitive to changes in specifications. In contrast, the negative effect on recorded music expenditure is statistically significant and robust to different specifications.
Main Results of the Study
- For most entertainment goods, average expenditure for Internet users has declined over time, indicating negative correlations between the development of the Internet and consumption of existing entertainment goods.
- The magnitude of the decline varies across different entertainment goods. In the case of recorded music, books, and admissions to movies and concerts, the average expenditures for Internet users have decreased considerably, whereas the decline appears to be relatively moderate for other entertainment goods.
- The decline in Internet users’ expenditures may simply reflect a common time trend.
- The apparent negative correlations between the growth of the Internet and expenditures on most entertainment goods may be confounded by compositional changes in Internet users in that non-users who tend to spend less on entertainment may have begun to use the Internet over time.
- Varying degrees of negative correlations across different entertainment goods may rather reflect changes in relative prices among these goods.
- The author finds varying degrees of potential substitutability between Internet growth and consumer expenditures across different entertainment goods. The growth of the Internet therefore seems to have substituted for consumption of existing entertainment goods.
- For most goods, these negative effects appear to be sensitive to changes in specifications.
- In contrast, the negative effect on recorded music expenditure is significant and robust to different specifications.
Policy Implications as Stated By Author
- The results provide further evidence on potential substitutability between the growth of the Internet and consumption of various entertainment goods.
- The results contribute to existing research examining other copyrighted goods in addition to recorded music, and by investigating other factors such as the effect of changes in relative prices.