Implications of barriers to trade for exports of cultural goods and services

This dissertation contains three studies. Chapter 2 studies the effect of product quality on foreign entry using data on U.S. movie exports and direct and revealed measures of movie quality. In the model, fixed costs of entry mean only the more appealing movies will find it profitable to enter each country. Empirically, a one-standard-deviation increase in quality increases the probability of entry by 25-50%. Movies in culturally-laden genres are less likely to enter foreign markets and their probability of entry is more sensitive to quality. I exploit differences in the propensity to import different genre types to estimate a measure of cultural distance between countries. The cultural distance measure enters a gravity equation of merchandise trade significantly. Chapter 3 investigates the international diffusion of a new product. Products traditionally enter foreign markets sequentially. This paper proposes that part of the explanation is that firms want to learn about their products’ appeal before incurring the fixed costs of entry. Each successive release serves to update the firm’s expectations for future performance---and thus their decision to enter more markets. On a sample of U.S. movies, I find that a one-standard-deviation increase in the update, based on the previous round’s box-office "surprise", is associated with a 25% increase in the probability of entry to a typical potential destination in the current round. Chapter 4 investigates Canada's interprovincial and international trade in services. While modern technology has allowed for long-distance service provision, regulatory non-tariff barriers may constitute substantial hurdles for further trade liberalization. This chapter describes three exercises contributing to the analysis of Canadian service trade. Using a theoretically-motivated framework, I estimate provincial and national border effects, and track the effect over time that distance has had on international trade.Business, Sauder School ofGraduat