Cultural diversity and international trade in cultural products

Whether free trade in cultural products 'serves' or 'erodes' cultural diversity has been widely discussed in the public arena, but within economics there has been relatively less research, despite the increasing influence of cultural trade on the economy. This thesis theoretically and empirically investigates how trade liberalisation in cultural products affects the degree of cultural diversity at both local and global levels, drawing upon the propositions from two sub-disciplines of economics : international trade and cultural economics. The thesis consists of three parts. In the first part, I examine various issues in defining the concept of cultural diversity and identify three types of cultural diveristy that are relevant in the context of international trade : the intra-national/local, inter-national and global cultural diversities. In the second part, I construct a bilateral model of cultural trade based on the standard 'new trade' theory framework with an additional assumption of cultural discounting behaviour of consumers and its asymmetry. The model proposes two effects, the home market effect and the hub effect, from which all three types of cultural diversities are at minimum if larger economies are also characterised by higher accessibility of their cultural contents. In the third part, I test the hypothesis by econometrically exploiting trade data for a particular cultural commodity, namely movies. There is not sufficient evidence found to reject the presence of the home market effect and the hub effect. In addition, I also find that the current decline of three cultural diversities exhibited in the international film industry is associated with the increasing cultural accessibility of the United States' films. The thesis concludes by discussing some implications of the results for cultural trade policy.