The purpose of this article is to examine how Korean consumers have paid media expenditure and to test empirically whether consumer income explains media expenditure through Relative Constancy Hypothesis.
As a research method, we used Dupagne(1996)...
The purpose of this article is to examine how Korean consumers have paid media expenditure and to test empirically whether consumer income explains media expenditure through Relative Constancy Hypothesis.
As a research method, we used Dupagne(1996)’ s Model which log of media expenditure is regressed on log of disposal income. The log-log functional fore is superior to the linear functional form to alleviate problems of heteroskedasticity and to calculate estimates of income elasticities. In addition, we tried to avoid spurious regression by first differencing each variable and reconstructed relative constancy testing model. We analyzed the data collected from 1966 until 1997. Disposable income as explanatory variable was taken from Nation Account(Bank of Berea). We used Kwon(1998.10)’ s media expenditure data as dependent variable.
Followings are the results of analysis. First, relative constancy hypotheses about broadcasting, software, print media and film were rejected. Second, hardware and electronic media(broadcasting, software and hardware) expenditure was not to be explained by income. In other words, expenditure on hard ware and electronic media can not be explained by relative constancy hypothesis. Third, for gross media expenditure, relative constancy hypothesis was rejected in log transformed model and not rejected in first-differenced model. The share of hardware expenditure in gross media expenditure could not be estimated by only income and it took average 52.4% for 32 years, so we can say that gross media expenditure can not be explained by income.
According to existing studies, relative constancy hypothesis was supported until 1970s, but it didn’t work since 1980s. For Korea, relative constancy was not supported even by data of 1970s. While gross media expenditure change except hardware can be explained by income, it was not increased at a same rate with income. After 1980, hardware expenditure was increased and at the same time, newspaper, broadcasting and software expenditure was increased, so relative constancy hypothesis could not work. So, when new mass media is to be introduced, its diffusion may not constrained by the income in Korea.