Neckties in the Tropics: A Model of International Trade and Cultural Diversity, Issue 11890
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. A reform of cultural policy suggested by our two-country analysis could be to remove import restrictions in the smaller country and replace them with subsidies to the fixed costs of production of new cultural goods in its traditional style.
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Andrei Shleifer Beatles cinema market share completely specialized consumption network externalities corner solution country is completely cultural discount cultural diversity cultural goods arc cultural goods production cultural goods quality decreases demand Denoting domestic cultural dominance dy dy Economics equilibrium without imitative Figure film and music fixed cost foreign country foreign cultural foreign imitative foreign traditional future cultural George Lucas H functions Helpman Hj(c home and foreign home market effect home varieties homogeneous ideas imitative cultural production imitative foreign varieties Imitative music imitative production impact imperfect substitutes implies import restrictions increased globalization inequality Kip Viscusi marginal cost Matthew Richardson monopolistic competition n(pT national arts agencies NBER Working Papers number of varieties numerical simulations output production of cultural Proof of Proposition quality of future Rebecca Henderson region of cultural representative home returns to scale rhythm and blues rural foreign consumers sufficiently small tariff taste discount trade in cultural traditional production varieties of cultural