Culture and authenticity: regulating shadow economy to foster market growth

Competition in the cultural and creative industries is much dependent upon product and service differentiation. Differentiation is about the unique features that are embedded in the cultural products themselves. These unique features relate to and determine, the value that consumers ascribe to cultural products. Authenticity is commonly used to underlie the uniqueness of a cultural product and is thus a sign of a thing worthy of admiration. Within this context the current study undertakes a comparison of practices related to the way in which authenticity in the paintings’ market is handled. The aim is to sketch policy interventions for effectively regulating the shadow economy in this market. It is argued that good regulations are necessary and if enforced, positive outcomes in terms of the paintings’ market turnover and employment levels might be generated. In particular, we discuss interventions that would transform the threat of an illegal fake market into an opportunity for market growth through the development of a ‘parallel authentic copy market’. Under certain conditions such a policy intervention could have direct and indirect positive effects via: a) the incorporation of an important part of the activities of the shadow economy in the official market, b) the use of a parallel market to protect consumers and their welfare and c) the use of the parallel market to strategically foster growth in the cultural industry at large. Given the economic significance of the cultural industries at both the national and the EU level and the commitment of the later to support the industry’s growth insights, as to how we might best regulate the market in line with such directions, are critical.