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Artfilms, Handicrafts and Other Cultural Goods: The Case for Subsidy

  • Cecile Aubert

    (Universite Paris IX,Dauphine, France)

  • Pranab K. Bardhan

    (Department of Economics, University of California, Berkeley)

  • Jeff Dayton-Johnson

    (OECD Development Centre, Paris)

Though widespread, the practice of public subsidies for cultural activity lacks a rigorous and consistent economic rationale. We analyze a canonical market structure that characterizes much cultural activity: the competition of mass-produced goods with heterogeneous non- standardized goods that are imperfect substitutes. We analyze several types of market failure: uncertainty about preferences (we do not know what we like, and we do not know what we might like in the future); endogeneity of preferences (we like what our neighbors talk about, and we like what we're accustomed to); and externalities associated with production (future production costs are determined by current production). The model provides a basis for cultural subsidies to promote social welfare and economic development.

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Paper provided by EconWPA in its series Public Economics with number 0407001.

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Length: 32 pages
Date of creation: 02 Jul 2004
Date of revision:
Handle: RePEc:wpa:wuwppe:0407001
Note: 32 pages, Acrobat .pdf
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