Do cultural differences affect the trade of cultural goods? A study in trade of music

This study investigates the impact of cultural differences on trade decision and trade volume of cultural goods, using the data of traded music compact discs (CDs). According to ethnomusicological and civilization classifications, we classify countries into several groups and make novel variables that properly represent the cultural differences. We use the gravity model of trade proposed in Helpman et al. (The Quarterly Journal of Economics 123(2):441–487, 2008), which is utilized to avoid selection and endogeneity biases of estimation. In addition, we exploit an identifying assumption on the types of consumers, so that one of the cultural variables can satisfy the exclusion restriction in our two-stage estimation procedure. Our empirical hypothesis is that the trade volume of music is larger between two countries with greater cultural familiarity. The empirical results show that cultural differences have significant influences on the trading decision and volume of music traded in addition to the traditional determinants of trade. This finding supports our hypothesis that cultural familiarity promotes the cultural goods trade.