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International Trade and Cultural Diversity: A Model of Preference Selection

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  • Vankatesh Bala
  • Ngo Van Long

Abstract

We consider the evolution of preferences when trade occurs between two countries. We show that if one country is much larger than the other, its preferences can eventually take over the preferences of the second country. This result may provide an explanation of why small countries sometimes exclude certain goods (especially those related to culture) from trade agreements. We also show that when the sensitivity of preferences to the relative price is high, the distribution of preferences can fluctuate cyclically over time.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-07/cesifo1_wp1242.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1242.

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Date of creation: 2004
Date of revision:
Handle: RePEc:ces:ceswps:_1242

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Related research

Keywords: preferences; evolution; culture; replicator dynamics; international trade;

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References

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  1. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  2. Bisin, A. & Verdier, T., 1997. "The Economics of Cultural Transmission and the Dynamics of Preferences," DELTA Working Papers 97-03, DELTA (Ecole normale supérieure).
  3. Hansson, Ingemar & Stuart, Charles, 1990. "Malthusian Selection of Preferences," American Economic Review, American Economic Association, vol. 80(3), pages 529-44, June.
  4. Becker, Gary S, 1993. "Nobel Lecture: The Economic Way of Looking at Behavior," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 385-409, June.
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  7. Pesendorfer, Wolfgang, 1995. "Design Innovation and Fashion Cycles," American Economic Review, American Economic Association, vol. 85(4), pages 771-92, September.
  8. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
  9. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  10. Francois, Patrick & van Ypersele, Tanguy, 2002. "On the protection of cultural goods," Journal of International Economics, Elsevier, vol. 56(2), pages 359-369, March.
  11. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
  12. Leonard, Daniel, 1989. "Market behavior of rational addicts," Journal of Economic Psychology, Elsevier, vol. 10(1), pages 117-144, March.
  13. Clemhout, S & Wan, H Y, Jr, 1970. "Learning-by-Doing and Infant Industry Protection," Review of Economic Studies, Wiley Blackwell, vol. 37(1), pages 33-56, January.
  14. Eckhard Janeba, 2004. "International Trade and Cultural Identity," NBER Working Papers 10426, National Bureau of Economic Research, Inc.
  15. Mailath, George J., 1992. "Introduction: Symposium on evolutionary game theory," Journal of Economic Theory, Elsevier, vol. 57(2), pages 259-277, August.
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Cited by:
  1. Olivier, Jacques & Thoenig, Mathias & Verdier, Thierry, 2008. "Globalization and the dynamics of cultural identity," Journal of International Economics, Elsevier, vol. 76(2), pages 356-370, December.
  2. Maystre, Nicolas & Olivier, Jacques & Thoenig, Mathias & Verdier, Thierry, 2009. "Product-Based Cultural Change: Is the Village Global?," CEPR Discussion Papers 7438, C.E.P.R. Discussion Papers.

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