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

James E. Rauch () and Vitor Trindade ()

No 618, Econometric Society 2004 North American Summer Meetings from Econometric Society

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

Keywords: Gains from trade; Cultural goods; Diversity; Network externalities (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2004-08-11
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Related works:
Working Paper: Neckties in the Tropics: A Model of International Trade and Cultural Diversity (2005)
Working Paper: Neckties in the Tropics: A Model of International Trade and Cultural Diversity (2005)
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