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

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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. Our two-country analysis suggests a reform of cultural policy whereby import restrictions in the smaller country are removed, and are replaced by subsidies to the fixed costs of production of new cultural goods in its traditional style.

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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0517.

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Length: 46 pgs.
Date of creation: 30 Nov 2005
Date of revision:
Handle: RePEc:umc:wpaper:0517

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Keywords: consumption network externalities; home market effect; globalization; cultural policy;

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  1. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  2. Jordi Sintas & Ercilia Álvarez, 2002. "The Consumption of Cultural Products: An Analysis of the Spanish Social Space," Journal of Cultural Economics, Springer, vol. 26(2), pages 115-138, May.
  3. 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.
  4. GianMarco Ottaviano & Giovanni Peri, 2004. "The Economic Value of Cultural Diversity: Evidence from US cities," Econometric Society 2004 North American Summer Meetings 91, Econometric Society.
  5. Francois, Patrick & van Ypersele, Tanguy, 2002. "On the protection of cultural goods," Journal of International Economics, Elsevier, vol. 56(2), pages 359-369, March.
  6. Nina Pavcnik, 2002. "Trade Disputes in the Commercial Aircraft Industry," The World Economy, Wiley Blackwell, vol. 25(5), pages 733-751, 05.
  7. Eckhard Janeba, 2004. "International Trade and Cultural Identity," NBER Working Papers 10426, National Bureau of Economic Research, Inc.
  8. Andreu Mas-Colell, 1999. "Should Cultural Goods Be Treated Differently?," Journal of Cultural Economics, Springer, vol. 23(1), pages 87-93, March.
  9. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 85-103, March.
  10. B. Curtis Eaton & Krishna Pendakur & Clyde Reed, 2000. "Socializing, Shared Experience and Popular Culture," Discussion Papers dp00-13, Department of Economics, Simon Fraser University, revised May 2000.
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Cited by:
  1. Maystre, Nicolas & Olivier, Jacques & Thoenig, Mathias & Verdier, Thierry, 2014. "Product-based cultural change: Is the village global?," Journal of International Economics, Elsevier, vol. 92(2), pages 212-230.
  2. Maria MASOOD, 2014. "New Evidence on Development and Cultural Trade: Diversification, Reconcentration and Domination," Working Papers P85, FERDI.
  3. Campbell, Douglas L., 2010. "History, culture, and trade: a dynamic gravity approach," MPRA Paper 24014, University Library of Munich, Germany.
  4. Anne-Célia Disdier & Keith Head & Thierry Mayer, 2011. "Exposure to foreign media and changes in cultural traits: evidence from naming patterns in france," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
  5. 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.
  6. 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.
  7. Janeba, Eckhard, 2007. "International trade and consumption network externalities," European Economic Review, Elsevier, vol. 51(4), pages 781-803, May.
  8. 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.

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