Research On Home Market Effect Of Chinese Cultural Products Trade

Krugman(1980)pointed out that in the two sector model with increasing returns to scale,trade costs and product differences,countries which have a relatively large local market will become net exporters,this is the "Home Market Effect".The existence of the home market effect shows that,in addition to the comparative advantages of technology and endowments,the increasing returns based on scale is also the driving force to promote trade expansion.Therefore,if a country does not have comparative advantages,or the existing advantages are fading,it can boost trade and enhance its trade position by boosting domestic demand.According to a report issued by UNESCO in March 2016 "The Globalisation of Cultural Trade:a Shift in Consumption—International flows of cultural goods and services 2004-2013" China has been ranked first in global cultural products export for 4 consecutive years.So,what is the dynamic mechanism of the rapid expansion of Chinese cultural products trade?Is it based on the comparative advantage of factor endowment,or on the home market effect based on increasing returns to scale?Is the home market effect of Chinese cultural products trade increasing with the decline of Chinese cultural products trade cost,as expected in theory?All these questions need further theoretical and empirical verification.Especially from the reality,under the condition of China's economic transformation,The recognition of the home market effect of China's cultural products trade is very important for China to seek a new source of comparative advantage and enhance the competitiveness of cultural products.Hence,basing on the analysis of the heterogeneity of the cultural industry,the objective of this paper is to empirically test the existence of the home market effect of Chinese cultural products trade.Combining trade cost,System analysis how to promote the development of Chinese cultural products trade and promote the competitiveness of Chinese cultural products trade,then propose corresponding and practical policy systems.Based on the thoroughly research on the heterogeneity of cultural industry in production,consumption,value,demand and industry correlation,this paper demonstrates that the cultural industry has the home market effect by incorporating the cultural industry into the Ottaviano and Thisse(2004)model.Besides,the home market effect of cultural products trade increasing with the decline of cultural products trade cost.On this basis,this paper further analysis the power mechanisms of the expansion of the local market driven the expansion cultural products trade:scale effect and innovation effect.Then,this paper incorporates variables that reflect the heterogeneity of cultural industries into the empirical test model of Schumacher?Siliverstovs(2006).On the basis of bilateral cultural products trade panel data between China and 40 countries from 2002 to 2015,this paper examines the existence of the home market effect of China's overall cultural product trade by utilizing both static panel model and dynamic panel model.Furthermore,classified cultural products export and the samples of developed countries and developing countries are tested to reveal the product diversity and transnational differences in the intensity of the home market effect.Finally,this paper selects the appropriate measurement method to measure the trade cost of Chinese cultural product export and analyzes its changing trend and characteristics.On that basis,using dynamic panel statistic method to estimate the impact that trade cost change has on the Home Market Effect.The conclusions of this study are as follows:1.The cultural industry has the characteristics of increasing returns to production,externalities of consumption,the"rational addiction" of demand,multiple attributes of value,and cross-border integration of industrial associations,which are quite different from traditional industries.These heterogeneous characteristics are of great significance to the study of cultural trade.2.The expansion of the two-state and two-sector model to validate the HME theory by Ottaviano and Thisse(2004),incorporating the cultural industry into the IRS sector with increasing returns to scale and producing differentiated products confirms that cultural industries with increasing returns to scale and differentiated products also have " Home Market Effect",in the local huge domestic market support,by leading to lower costs,innovative products and other mechanisms to drive cultural differences in trade expansion.And,along with the reduction of trade costs,the Home Market Effect is increasing.3.Based on the research on the trade scale,trade structure and trade geography of the Chinese cultural products trade from 2002 to 2015,this paper found that:China cultural products export continues ranked first in the world,the trade surplus is obvious,China has grown into a cultural product export country.But at present,the export of cultural products is still mainly a "extensive" and "intensive marginal"growth,not only a considerable number of cultural products has a trade deficit,and what's more,the competitiveness of some content products is obviously insufficient,A large part of its competitive advantage stems from the natural extension of its manufacturing advantages to the field of cultural products.The status of the exporting country of cultural products has not reached the ideal and desirable realm.4.Based on the static panel data model of China and 40 countries' cultural products trade from 2002 to 2015,The empirical analysis demonstrates that the home market effect of China's overall trade cultural products is significant with the control of human capital,the level of scientific and technological application,technical differences,foreign capital and intellectual property protection and other factors.This indicats that the continued expansion of the size of the home market is also an important driving force to promote the expansion of Chinese cultural products trade.At the same time,the continued expansion of the scale of the home market of cultural products,R&D investment gradually increased,accelerating accumulation of cultural talent have become a accelerator for the export expansion of cultural products.5.The empirical tests of Chinese overall cultural products trade,classified cultural products trade,samples from developed countries and samples from developing countries between China and 40 countries from 2002 to 2015 further confirms the robust existence of the home market effect.The test results of the panel data model of classified cultural products show that the home market effects are different in intensity due to different industrial characteristics.Compared to functional cultural products,the home market effect of content-based cultural products is stronger.Increasing R&D investment,accelerating the development of information technology and raising the level of human capital can promote the home market effect,but the impact on the export of content-based cultural products is more significant.The dynamic panel data model of developed country samples and developing country samples shows that there is strong inter regional difference in the strength of the home market effect.Compared to developed countries,there is a more prominent home market effect on cultural products trade to developing countries.At present,the expansion of the export of cultural products to developed countries still depends on the drive of factor endowments to a certain extent.In cultural products trade to developing countries with little difference in endowments,the huge local market scale has played a relatively more significant role.6.The measurement of the export cost of cultural products between China and 34 trading partners for 2002-2015 years shows that the trade cost of Chinese cultural products trade declines during the study period.Based on the dynamic panel data of China and 34 trading partners in 2002-015,the empirical test results show that consistent with the theoretical analysis,with the decline of trade costs,the home market effect is more significant;the reduction of trade costs reinforces the home market effect of Chinese cultural product exports.At the same time,intra-industry trade,relative transportation infrastructure and relative economic freedom also play a positive role in promoting the home market effect.Finally,this paper points out that the cultivation of the home market,the increase of returns to scale and the home market effect are the new sources of the sustained and steady growth of Chinese cultural product trade,and further analyzes its policy implications.