Trade in Cultural Goods: A Case of the Korean Wave in Asia

Abstract

(ProQuest: ... denotes non-US-ASCII text omitted.)(ProQuest: ... denotes formulae omitted.)(ProQuest: ... denotes text missing in the original.)I. IntroductionCulture and cultural industries can be defined in many ways. According to the information in Wikipedia on Economics of the arts and literature, most of cultural art works such as books, recordings, and movies are reproducible and they are characterized by uncertainty on value, infinite variety, high concentration in trade products, short life cycle, and high fixed cost.Traditional theories on international trade have been mostly concerned with trade in general products while ignoring the unique features of cultural products such as intangible aspects, minimal transportation cost, and preference selection. Only recently did some economists start to pay attention to the trade in non-traditional goods, particularly to trade in services.Since trade in services and trade in cultural goods share in part common features, it is worth mentioning a few studies on service trade. Grunfeld and Moxnes (2003) study the determinants of service trade and foreign affiliate sales using a gravity model and data from OECD. Their results found that the general pattern of the gravity model effects also applies to services. Economic size of the two countries is positively related and the distance between them are negatively related.Kimura and Lee (2004) also apply the standard gravity framework to services trade. They found that compared with goods trade, distance between countries is more important in services trade. Lejour and de Paiva Verheijden (2004)'s comparison between goods and service trade between Canada and EU shows that distance is less important for services compared to goods.The number of studies on cultural trade is very small and they have been limited to theoretical aspects of cultural identity. Janeba (2004) studies the effects of trade liberalization on cultural identity and shows that cultural diversity in the home market is not always beneficial in the case of free trade.Rauch and Trindate (2005) study the consumption aspect of trade utilizing consumption network externalities. The concept of network externalities originated from the IT industry and it has been widely incorporated in economic modeling after the pioneering work of Kats and Shapiro (1985). Rauch and Trindate (2005) combine both the home market effect model of Helpman and Krugman (1985) in the supply side and consumption network externalities in the demand side to explain why some cultural goods dominate in other cultures. An interesting example is the clothing style of the tropical region. Because of Western cultural influence, we witness millions of necktie-wearing tropical businessmen and office workers despite the inappropriate weather condition.The above mentioned research papers are purely concerned with theoretical modeling while Felbermayr and Toubal (2010) focus more on the empirical relationship between cultural proximity and international trade. In their research paper, Felbermayr and Toubal use the Eurovision Song Contest (ESC) as a proxy for cultural ties. The Eurovision Song Contest (ESC) is a big pan-European televised show in which each artist from a participating country performs a song. The other countries grade those songs and the winner is selected accordingly. The paper suggests that the results of the ESC significantly reflect how closely each country feels toward other European countries. After setting the ESC as a proxy cultural tie, they found that there is indeed a significant relationship between ESC scores and international trade. Whereas their research highlights the importance of cultural proximity in international trade, it does not deal with either trade in cultural products or the dynamic change of preferences.Blum and Goldfarb (2006) analyze data on Internet activities by US consumers on non-US websites. …