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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 sametime, producers of new cultural goods in any one country draw on the stock of ideasgenerated by previous cultural production in all countries. For such goods, costless tradeand communication tend to lead to the dominance of one cultural style, increasing utilityin 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 bystimulating production of cultural goods that are compatible with the dominant style,thereby capturing consumption network externalities, but that add little to the stock ofusable ideas. Our two-country analysis suggests a reform of cultural policy wherebyimport restrictions in the smaller country are removed, and are replaced by subsidies tothe fixed costs of production of new cultural goods in its traditional style.

Suggested Citation

  • Vitor Trindade & James E. Rauch, 2005. "Neckties in the Tropics: A Model of International Trade and Cultural Diversity," Working Papers 0517, Department of Economics, University of Missouri.
  • Handle: RePEc:umc:wpaper:0517
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    References listed on IDEAS

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    Cited by:

    1. Disdier, Anne-Célia & Head, Keith & Mayer, Thierry, 2010. "Exposure to foreign media and changes in cultural traits: Evidence from naming patterns in France," Journal of International Economics, Elsevier, vol. 80(2), pages 226-238, March.
    2. 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.
    3. 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.
    4. Maria MASOOD, 2014. "New Evidence on Development and Cultural Trade: Diversification, Reconcentration and Domination," Working Papers P85, FERDI.
    5. 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.
    6. Douglas L. Campbell, 2010. "History, Culture, and Trade: A Dynamic Gravity Approach," EERI Research Paper Series EERI_RP_2010_26, Economics and Econometrics Research Institute (EERI), Brussels.
    7. Nobuko Serizawa & Shigeru Wakita, 2016. "Variety-Controlling Public Policy Under Addiction and Saturation," The Japanese Economic Review, Japanese Economic Association, vol. 67(1), pages 125-140, March.
    8. Eiji Yamamura & Inyong Shin, 2016. "Effect of consuming imported cultural goods on trading partners’ tolerance toward immigrants: the case of Japanese anime in Korea," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(4), pages 681-703, November.
    9. Matthew T. Cole & Ronald B. Davies, 2014. "Royale with Cheese: Globalization, Tourism, and the Variety of Goods," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 386-400, May.
    10. Friberg, Richard & Paterson, Robert W. & Richardson, Andrew D., 2011. "Why is there a Home Bias? A Case Study of Wine," Journal of Wine Economics, Cambridge University Press, vol. 6(01), pages 37-66, January.
    11. Janeba, Eckhard, 2007. "International trade and consumption network externalities," European Economic Review, Elsevier, vol. 51(4), pages 781-803, May.

    More about this item

    Keywords

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

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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