Trade Liberalization and Culture
-
Steven Suranovic
and
Robert Winthrop
Abstract
This paper addresses the effect of international trade on cultural outcomes from both economic and anthropological perspectives. Definitions of culture are informed by anthropology and then incorporated into a standard economic trade models in two distinct ways. In the “cultural affinity from work” model, workers receive a non-pecuniary cultural benefit from work in a particular industry. In the “cultural externality” model, consumers of a product receive utility from other consumer’s consumption of a domestic good. We show that resistance to change due to cultural concerns can reduce the national benefits from trade liberalization. Complete movements to free trade will have a positive national welfare impact in the cultural affinity case, whereas it may lower national welfare in the cultural externality case. We also show that a loss of cultural benefits is more likely to occur when culture is an externality.
The views expressed are the authors’, and do not represent the policies of the Department of the Interior
Acknowledgments
The authors wish to thank participants at the George Washington University Economics Department seminar; colleagues in the Program on Culture in Global Affairs in the Elliott School at GW University, colleagues at the Society for Applied Anthropology annual meeting and the Institute for International Economic Policy.
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- 2
In the 1990s Canada responded to foreign (read: American) domination of its magazine market with several measures, including a special tariff, an eighty percent excise tax on foreign periodicals, and preferential postage rates for domestic periodicals. The United States successfully challenged these policies at the World Trade Organization, whose dispute settlement board found all measures in violation of WTO rules (Carmody 1998, Sec. IV). See Carmody (1998) and Knight (1999) for an analysis of this case.
- 3
The consumption externality effect is assumed to hold only for consumption of the domestically produced good consumed at home. Since we assume an equilibrium in which the cultural good is imported, the domestic production of good A is identical to domestic consumption of the domestic good and hence we can model this like a domestic production externality.
- 4
For a thorough discussion of non-pecuniary influences on wage determination see Rosen (1986).
- 5
The initial equality of wages across sectors is not necessary for these same results to follow; however, the assumption does make for a convenient point of reference.
- 6
Since the exercise we perform is trade liberalization, this will cause a movement of factors from the import sector to the export sector. Since workers in the export industry will have no reason to exit the industry, it will be immaterial if they have an NPCB.
- 7
The idea is that cultural benefits arise as a history develops in an industry. A new entrant to an industry would not receive the cultural benefit until he or she had been there for some time. As long as the marginal cultural benefit to a new worker is zero at time of entry, B workers would not be attracted to industry A. Alternatively, we could assume that B workers have established their own history and cultural benefits which would have to be given up to move to industry A where new cultural benefits would take time to accrue.
- 8
The formula requires the marginal utility of income to be fixed for all income levels.
- 9
©2014 by Walter de Gruyter Berlin / Boston
Articles in the same Issue
- Frontmatter
- Articles
- Do Remittances Attract Foreign Direct Investment? An Empirical Investigation
- Does the Presence of Multinational Corporations Affect a Country’s Gross Domestic Product?
- Assessing the Effect of the Consumer-Voter Sentiment on Tiebout-Like Migration: The EU 27 Case
- Trade Liberalization and Culture
- What’s News
- An Empirical Analysis of the Aggregate Export Demand Function in Post-Liberalization India
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- When Do Currency Unions Increase Trade?
Articles in the same Issue
- Frontmatter
- Articles
- Do Remittances Attract Foreign Direct Investment? An Empirical Investigation
- Does the Presence of Multinational Corporations Affect a Country’s Gross Domestic Product?
- Assessing the Effect of the Consumer-Voter Sentiment on Tiebout-Like Migration: The EU 27 Case
- Trade Liberalization and Culture
- What’s News
- An Empirical Analysis of the Aggregate Export Demand Function in Post-Liberalization India
- Evolving Domestic Bond Markets and Financial Deepening in Asia
- When Do Currency Unions Increase Trade?
