Trade and Diversity: Is There a Case for ‘Cultural Protectionism?’

Carsten Eckel

German Economic Review, 2006, vol. 7, issue 4, 403-418

Abstract: In contrast to the predictions of standard models of international trade, globalization critics are claiming that trade destroys diversity. We demonstrate that with endogenous sunk costs, trade integration in horizontally differentiated industries can indeed lead to a fall in diversity. Consumers are faced with a tradeoff between gains in real income and a loss in diversity, so that the impact on welfare is ambiguous. However, it is possible through fiscal policies to replicate pre-trade choices and still realize gains in real income. Thus, calls for a ‘cultural protectionism’ are not justified.

Keywords: Intra-industry trade; diversity; welfare; endogenous sunk costs; cultural protectionism (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1111/j.1468-0475.2006.00126.x

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