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

  • James E. Rauch
  • Vitor Trindade

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 replaced by subsidies to the fixed costs of production of “authentic†new cultural goods, funded by contributions from the larger country

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 618.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:618
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  1. Gianmarco I.P. Ottaviano & Giovanni Peri, 2004. "The Economic Value of Cultural Diversity: Evidence from US Cities," NBER Working Papers 10904, National Bureau of Economic Research, Inc.
  2. 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.
  3. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  4. 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.
  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. Eckhard Janeba, 2004. "International Trade and Cultural Identity," NBER Working Papers 10426, National Bureau of Economic Research, Inc.
  7. Nina Pavcnik, 2002. "Trade Disputes in the Commercial Aircraft Industry," The World Economy, Wiley Blackwell, vol. 25(5), pages 733-751, 05.
  8. 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.
  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. 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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