Stefania Lionetti, Ph.D and Roberto Patuelli, Ph.D. Istituto di Ricerche Economiche, University of Lugano, via Maderno 24, Lugano, 6904, Switzerland
Augmented gravity model: an empirical application to
cultural goods trade flows
Even if the cultural sector carries important economic and financial stakes, it is very difficult to claim for the potential of culture as a determinant of sustainable development because of the lack of basic quantitative and qualitative economic analysis. There is the need for economic research to develop new approaches to policy making.
This paper gives a brief description of the patterns of production and consumption of cultural goods, and indirectly of those of cultural services. The data reveal the continuing existence throughout the 1980s and 1990s of large variations in the capacities of individual to export cultural goods. In many developing or small countries, these capacities appear to have shrunk in the considered period. Overall by the end of 1998 the flows of trade in cultural goods are unbalanced, with few producers and many buyers. There are great structural disparities both within and between the various regional trading blocs. E-commerce is rapidly generating new avenues of trade.
The potential benefits/damages of liberalizing cultural industries still give rise to debate, especially in WTO negotiations. Most of trade in cultural goods between 1980 and 1998 was carried on among the developed countries themselves (78% of imports in 1998, as against 87% in 1980), and the value of these cultural goods almost tripled between 1980 ($42 billion) and 1997 ($123 billion). Since the developing countries started from a lower base, their increase has been even more notable, registering a more than ten-fold increase ($57 billion in 1997, as against $5.5 billion in 1980).
This paper applies a gravity model specification to trade flows of cultural goods. It analyses the market trends and trade patterns in eight categories of cultural goods, and it measures the related potential market for countries which still have to strengthen intellectual property rights.
The statistics compiled, analyzed and presented in this study have been drawn from data provided by the Commodity Trade Statistics Division of the United Nations (COMTRADE).
There have been constructed seven panels for the years 1980, 1985, 1990, and the range between 1995-1998 for a total of seven years
All the explanatory variables included, with the exception of distance, are found to be significant. In particular, we find a significant effect of our indicator of intellectual property rights development.
In addition to the baseline model, the paper proposes an alternative econometric approach, based on special filtering techniques, which accounts for the correlation in the countries' inward and outward flows induced by geographical proximity, as well as for the flows' autocorrelation.