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Artfilms, Handicrafts and Other Cultural Goods: The Case for Subsidy

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  • Aubert, Cècile
  • Bardhan, Pranab
  • Dayton-Johnson, Jeff

Abstract

Though widespread, the practice of public subsidies for cultural activity lacks a rigorous and consistent economic rationale. We analyze a canonical market structure that characterizes much cultural activity: the competition of mass-produced goods with heterogeneous non-standardized goods that are imperfect substitutes. We analyze several types of market failure: uncertainty about preferences (we don’t know what we like, and we don’t know what we might like in the future); endogeneity of preferences (we like what our neighbors talk about, and we like what we’re accustomed to); and externalities associated with production (future production costs are determined by current production). The model provides a basis for cultural subsidies to promote social welfare and economic development.

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Bibliographic Info

Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt62n4f3bh.

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Date of creation: 23 Nov 2003
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Handle: RePEc:cdl:econwp:qt62n4f3bh

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Keywords: cultural goods; subsidy; externalities;

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References

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Cited by:
  1. Jeff Dayton-Johnson & Emily King, 2003. "Subsidising Stan - Measuring the social benefits of cultural spending," Department of Economics at Dalhousie University working papers archive wpstan, Dalhousie, Department of Economics.
  2. Pranab Bardhan, 2006. "Globalization, Inequality, and Poverty," IDB Publications 9126, Inter-American Development Bank.

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