Mathias Thoenig (Université de Geneve, PSE and CEPR)

This paper presents a simple model in which microfounded dynamics of cultural identity are endogenous and interact with an international trade equilibrium. Within our framework, cultural identity gives rise to a positive group externality among agents who share the same culture and similar consumption patterns. The distribution of cultures within a given country is endogenous and comes as the outcome of a dynamic process of parental socialization and transmission of preferences. We first show that this process generates a home bias under autarky. We then consider the impact of different forms of integration on local cultures. We show that integrating standard goods markets results in cultural divergence, whereby the distributions of cultures become more dissimilar across countries.We next show that the importer of cultural goods always experiences an erosion of its local culture but that trade in cultural goods may result in either cultural convergence or cultural divergence. We finally discuss the impact of virtual integration and find that virtual integration unambiguously erodes local cultures in all countries. Classification: F02, F10, Z10, Z13. Keywords