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Neckties in the Tropics: A Model of International Trade and Cultural Diversity

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  • James E. Rauch
  • Vitor Trindade

Abstract

Some cultural goods, like clothes and films, are consumed socially and are thus characterized by the same consumption network externalities as languages. At the same time, producers of new cultural goods in any one country draw on the stock of ideas generated by previous cultural production in all countries. For such goods, costless trade and communication tend to lead to the dominance of one cultural style, increasing utility in the short run but reducing quality and generating cultural stagnation in the long run. Increasing trade costs while keeping communication costs low may reduce welfare by stimulating production of cultural goods that are "compatible" with the dominant style, thereby capturing consumption network externalities, but that add little to the stock of usable ideas. A reform of cultural policy suggested by our two-country analysis could be to remove import restrictions in the smaller country and replace them with subsidies to the fixed costs of production of new cultural goods in its traditional style.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11890.

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Date of creation: Dec 2005
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Handle: RePEc:nbr:nberwo:11890

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  1. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  2. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
  3. Gianmarco I.P. Ottaviano & Giovanni Peri, 2004. "The Economic Value of Cultural Diversity: Evidence from US Cities," CESifo Working Paper Series 1117, CESifo Group Munich.
  4. Bala, Venkatesh & Van Long, Ngo, 2005. "International trade and cultural diversity with preference selection," European Journal of Political Economy, Elsevier, vol. 21(1), pages 143-162, March.
  5. Andreu Mas-Colell, 1999. "Should Cultural Goods Be Treated Differently?," Journal of Cultural Economics, Springer, vol. 23(1), pages 87-93, March.
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  8. Eckhard Janeba, 2004. "International Trade and Cultural Identity," NBER Working Papers 10426, National Bureau of Economic Research, Inc.
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Cited by:
  1. Disdier, Anne-Célia & Head, Charles Keith & Mayer, Thierry, 2006. "Exposure to Foreign Media and Changes in Cultural Traits: Evidence from Naming Patterns in France," CEPR Discussion Papers 5674, C.E.P.R. Discussion Papers.
  2. Campbell, Douglas L., 2010. "History, culture, and trade: a dynamic gravity approach," MPRA Paper 24014, University Library of Munich, Germany.
  3. Hanson, Gordon & Xiang, Chong, 2011. "Trade barriers and trade flows with product heterogeneity: An application to US motion picture exports," Journal of International Economics, Elsevier, vol. 83(1), pages 14-26, January.
  4. Maria MASOOD, 2014. "New Evidence on Development and Cultural Trade: Diversification, Reconcentration and Domination," Working Papers P85, FERDI.
  5. 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.
  6. Janeba, Eckhard, 2007. "International trade and consumption network externalities," European Economic Review, Elsevier, vol. 51(4), pages 781-803, May.
  7. Gordon H. Hanson & Chong Xiang, 2009. "International Trade in Motion Picture Services," NBER Chapters, in: International Trade in Services and Intangibles in the Era of Globalization, pages 203-222 National Bureau of Economic Research, Inc.
  8. Friberg, Richard & Paterson, Robert W & Richardson, Andrew D, 2010. "Why is there a home bias? A case study of Wine," CEPR Discussion Papers 7885, C.E.P.R. Discussion Papers.

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