COMMUNICATION MEDIA AND DEMAND FOR PRINTING AND PUBLISHING PAPERS IN THE UNITED-STATES

To predict the demand for printing and publishing papers, a model was first developed of the demand for printed materials-newspapers, books, magazines, and their substitutes-computers, and televisions and radio s. A two-stage Almost Ideal Demand System (AIDS) represented the consu mer demand for communication media (stage one) and for printed materia ls, computers, and televisions and radios (stage two). Annual United S tates data from 1960 to 1991 were used to estimate the expenditure sha re equations and related elasticities. The results suggest that during that period: (1) printed materials and computers were luxury goods; ( 2) the demand for printed materials was independent of the price of co mputers and slightly complementary of the demand for televisions and r adios; and (3) the demand for printed materials was most sensitive to its price and to income. Then, the demand for paper by the printing an d publishing industry was derived from a two-stage translog cost minim ization model. The first stage describes the demand for paper to make printed materials together with labor, capital, and other materials. T he second stage decomposes the demand for paper into that for each pri nting and publishing grade. Results show that during the period of obs ervation, (1) paper demand was inelastic; (2) labor, capital, and othe r materials were substitutes for paper in making printed materials; an d (3) technical change led to a relative decrease in the use of newspr int, and an increase in that of other paper grades. Equating productio n of printed materials to consumer demand led to the derived demand fo r each paper grade. The elasticities suggested that paper demand was n ot influenced much by the price of electronic media. A decomposition a nalysis of the growth in demand for printing and publishing papers sho wed that from 1981 to 1991 the positive income effects were most impor tant, followed by the negative effects of changes in the prices of pri nted materials.