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Trade and diversity: Is there a case for ’cultural protectionism?’

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  • Eckel, Carsten

Abstract

In contrast to the predictions of standard models of international trade, globalization critics are claiming that trade destroys diversity. We demonstrate that with endogenous sunk costs, trade integration in horizontally differentiated industries can indeed lead to a fall in diversity. Consumers are faced with a tradeoff between gains in real income and a loss in diversity, so that the impact on welfare is ambiguous. However, it is possible through fiscal policies to replicate pre-trade choices and still realize gains in real income. Thus, calls for a ’cultural protectionism’ are not justified.

Suggested Citation

  • Eckel, Carsten, 2006. "Trade and diversity: Is there a case for ’cultural protectionism?’," Munich Reprints in Economics 20535, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:20535
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    1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
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    Cited by:

    1. Lorz Oliver & Wrede Matthias, 2009. "Trade and Variety in a Model of Endogenous Product Differentiation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-14, November.

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