Download cultural goods trade as a transformative force in the global economy

Number 03:2014
CULTURAL GOODS TRADE AS A
TRANSFORMATIVE FORCE IN THE
GLOBAL ECONOMY: A CASE OF PAKISTAN
Saba Salim
Zafar Mahmood
August, 2014
NUST School of Social Sciences and Humanities
National University of Sciences and Technology
Sector H-12, Islamabad, Pakistan
S3H Working Paper Series
Faculty Editorial Committee
Dr. Zafar Mahmood (Head)
Dr. Najma Sadiq
Dr. Sehar Un Nisa Hassan
Dr. Lubaba Sadaf
Dr. Samina Naveed
Ms. Nazia Malik
ii
Contents
ABSTRACT ............................................................................................................................................ ii
1. INTRODUCTION......................................................................................................................... 1
2. LITERATURE REVIEW .............................................................................................................. 4
3. OVERVIEW OF PAKISTAN ECONOMY ............................................................................. 6
4. THEORATICAL FRAMEWORK .............................................................................................. 9
5. EMPIRICAL ANALYSIS ............................................................................................................ 13
6. RESULTS AND DISCUSSION................................................................................................. 14
6.2 Empirical Analysis ...................................................................................................................... 16
6.2.1 Unit Root test ....................................................................................................................... 16
6.2.2
Generalized Least Square: .............................................................................................. 17
7. CONCLUSION AND RECOMMENDATIONS .................................................................. 21
7.1
Conclusion.............................................................................................................................. 21
7.2 Policy Implications .................................................................................................................. 22
7.3
Future Research Prospects .................................................................................................... 23
REFERENCES .................................................................................................................................... 24
APPENDICES……………………………………………………………………………………………………27
i
ABSTRACT
In the era of economic globalization, cultural goods trade is playing a vital role in overall
bilateral trade and it is developing at a faster pace. Cultural adherence whether chosen, inherited or
imposed affects economic activity. Determinants of the cultural goods exports for the period of 20032012 for 157 trading partners were investigated. The Gravity model is used to determine the factors
affecting exports of cultural goods. Six categories of cultural goods have been considered that are
classified into 6 digits level HS codes. Market sizes of both exporting and importing countries as well as
distance turned out as important determinants of cultural goods exports. Results specifically show that
cultural goods exports are strongly influenced by GDP growth rate in Pakistan. On other hand, partner
countries GDP negatively influence GDP growth of cultural goods exports from Pakistan. Distance
has negative influence on exports of cultural goods. Some policy implications are also discussed.
Key words: Gravity model, Cultural goods, HS codes, trading partner
ii
1. INTRODUCTION
The cultural goods1 trade has become an emerging and transformative force behind
globalization. Its potential is still largely unexplored and not fully unlocked for development. Cultural
goods have now become an important mean of income generation, job creation and export earnings.
Cultural goods trade has become a source of not only growth and development but also to empower
people. All development programs that are initiated by considering peace initiatives, stability, gender
empowerment and values are most likely to be successful with positive and transformative change. In
other words if these programs are developed as people centered along with their cultural values and
aspects, will provide new opportunities of trade (UNESCO, 2005).
Realizing the importance of exchange of cultural goods across borders, the United Nations as
well as leaders of the world are working together in emphasizing the significance of cultural
cooperation to meet the future development targets and goals. The Secretary General of the United
Nations Organization Ban Ki-moon in a General Assembly debate on culture and development held in
June 2013 stated in his opening remarks: “Most of the development programs that are well-intended
have failed as there were no cultural considerations into account. Development has not been focused
on people. We must need to understand people and their culture. This can only be possible by means
of dialogue, listening to them, considering human rights and values and ensuring the importance of
their culture” (UNESCO, 2013).
Unlike conventional goods, cultural goods carry information about its origin market. It contains
information such as people preferences, social attributes and values (Cheptea, 2007).
1
Consumer goods dispersing thoughts, signs and standard of living, when providing facts and amusement to form group
and to recognize and influence cultural behavior. it includes antiques, musical instrument, jewelry, crafts, paintings,
newspaper, visual arts, etc.
1
Throughout human history, people learnt from their environment and influenced with
surrounding nations. People used to trade, travel, migrate or even invade via their armies and leave
their cultural influence, which lasts for long. People learned and developed their lives by learning skills
and way of life that suits them. Even today this process has not stopped. Different countries that have
different demographics and history, adopts and learn from each other. The cultural difference between
countries has its effect on trade in a complex way. Also trade among countries has its effects on culture.
Similarly, there is high possibility that countries with common cultural attributes may trade more. But if
trade is built on comparative advantage then with diverse culture may trade more (Cyrus, 2011).
There are very few countries which participate in global trade of cultural good (Maria, 2013). In
year 2002, China, UK, USA, Hong Kong, France, India and Germany captured more than 55% of total
cultural goods exports while total imports were 53.5% (UNESCO, 2005). As a new source of the world
economy, cultural goods trade flows has been continuously increasing with fast pace since the last
decade. Therefore, cultural trade liberation is considered as an important current issue as well as that
will become part of future multilateral trade negotiations (Lili, 2011). The world markets witnessed a
sharp increase in trade of cultural goods from US$47.8 billion in 1980 to US$213.7 billion in 1998
(UNESCO, 2000).The exports for cultural goods and services reached US$424.4 billion in 2006. While
increasing at an annual rate of 8.7 percent till 2006, creative industries2 gained considerable market
shares globally (Lionetti and Patuelli, 2010).
Almost 40% of trade in cultural products is carried by China, the United States and the United
Kingdom. China is the sixth biggest importer and the third biggest exporter of cultural goods.
Singapore’s position is also very strong and it ranks amongst the top exporters as the second largest
exporter of 2002. Also, Singapore ranks 7th in Printed Media export. Japan stands in Asian top ten
exporters of Media (audiovisual). As far as import is concerned, China emerged as one of the largest
2
In order to differentiate, UNESCO categorized cultural goods and defined core cultural goods by its contents. Cultural
industries produce core cultural goods whereas related cultural goods are produced by creative industries. Creative
industries concentrate on broader aspects of the process than cultural industries.
2
importer of printed media, (i.e., newspapers, periodicals, books, etc.), which estimates US$7.75 billion
or about 50% of total global trade of cultural goods. In 2002, Canada was the largest consumer of print
media importing US$647 million of cultural goods (Drew, 2007).
Empirical evidence has shown that countries that had focused and enhanced their trade in
cultural goods had got significant increase in their overall trade and economic level. Countries like the
United States, the United Kingdom and India utilized modern media technology for building up their
global image and got acceptance and adaptation of their culture in various countries of the world.
Sometimes common factors such as language, common history, religion, geographical facts also play
very important role for cultural goods demand among different nations. Due to its intangible nature,
the services and products of cultural industries are mostly protected by copyrights. Copyrights serve as
an important variable or determinant to investigate its effects on trade of cultural goods (Lionetti and
Patuelli, 2010). In the 20th century, scholars in all fields examined cultural factors and its influence on
global trade at different viewpoints, which includes religious beliefs, language, colonial affiliation,
distance etc.
Pakistan has very strong and rich cultural heritage and has its roots to ancient times. It has
influence of many nations in the past and till now which also includes colonial rule, each of them
brought several cultural influence and now has a beautiful mix and combination of all of them. Pakistan
has its unique identity amongst other nations and can be identified by its unique music, arts, antiques,
and sculptures in all over the world. Unlike other nations such as USA, UK, Germany and China,
Pakistan has been unsuccessful in promoting its trade in cultural goods initially, though Pakistan has
tremendous potential in cultural goods. But now things have been changing gradually and it appears as
now Pakistan has got the matured and active platform (telecommunication, electronic media, and print
media) to participate in global trade in cultural goods that has not been in the past.
3
There are very few studies which deal in cultural goods trade globally. It is probably the first
study on Pakistan’s trade in cultural goods with its partners. Over the time cultural goods trade has
become an emerging and transformative force in the global economy. This area is virtually untapped in
case of Pakistan. Therefore, there is a need to have a research that can show Pakistan’s position as well
as identify its hidden potential of trade of its cultural goods. This research can provide the insight that
if properly utilized, will directly not only boost the overall economy and trade of Pakistan. But also
increase exports that will create employment opportunities and will also bring Pakistan closer to the
International community. This motivates us to analyze the unexplored area of Pakistan’s trade in
cultural goods.
Given the importance of cultural goods trade for the economy of Pakistan, this study examines
the determinants of cultural goods trade of Pakistan with its trading partners. Harmonized system (HS)3
based on six digit level is used in the Gravity model to analyze variations in the significance of cultural
goods trade among countries with time.
2. LITERATURE REVIEW
Trade in cultural products is increasing day by day and government plays important role in this
regard. Due to this reason many scholars have work specifically on this issue. They test trade in cultural
goods from different perspective such as colonial link, common language, same border, distance etc.
Lionetti and Patuelli (2010) analyzed the impact of digital piracy on cultural goods trade. He
focused on trade in music, films and media of 25 countries by using panel data of period 1996 to 2006.
Augmented gravity model was used to study the changes in worth of trade of different countries with
time. Trade flows among countries was taken as dependent variable. Results indicate that there is
3
It is a coding system known for coding Harmonized Commodity Description of tariff nomenclature. It is a system of International
standard of names and codes in order to classify traded products maintained by the World Customs Organization (WCO).
4
negative relationship among piracy and trade in music while positive in media and films. Specifically,
consumer countries piracy tends to discourage demand for music. GDP seems to be positive in both
cases i.e. importing and exporting economy. In importing country case of music, trade elasticity with
respect is high. Distance appears to be negative and significant for new media, music and films. Free
trade agreements have positive affect on new media and music. Although, it does not have any impact
on movie market common language plays significant role for both films and music.
Disdier,et al. (2010) used data from 1989 to 2005 and covered 239 countries. They studied
determinants of cultural goods trade, i.e., media, books, audio visuals and visual arts. They took trade in
cultural goods as proxy for preferences of countries. For robustness they used UNESCO and Eurostat
data base. By making use of gravity model they identify positive and significant effect of cultural flows
on trade common language and past colonial links shows positive relationship with trade. While trade is
negatively related with distance among countries and exhibits that cultural goods are traded over
smaller distance than non-cultural goods.
Lili (2011) used panel data from 1992 to 2008 and studied Chinese cultural trade by using a
gravity model. Countries under analysis are China and other nine countries. Results suggests that
economic size, GDP, trading partners, land area economic size, and cultural distance from China shows
positive affect of cultural goods exports. While trading partners’ terms of trade and geographical
distance from China exhibits negative link with the export flows of Chinese cultural goods. Those
countries import more which shares common language.
Masood (2013) found the relationship among cultural trade and development. She focused on
cinema and music trade by using data of 124 developing countries. For cinema data were collected for
years 1995 to 2007 and for music from 1995 to 2004. Her framework was determined by the definition
5
of UNESCO of recorded media and audio visuals. Results suggest that income increases leads to
expansion of diversities consumed.
Pakistan has diversified culture, language and traditions. Pakistan has great potential in cultural
goods but unfortunately Pakistan hasn’t got a chance to get access to the global market for its cultural
goods trade. Unlike other countries like China, India who are successful in promoting their culture and
got access in global market gave them a respectable position in recognizing their uniqueness and
identity. According to my knowledge none of the studies in Pakistan have tried to work on Pakistan’s
cultural goods trade with its trading partners. This study intends to fill this gap and expected to make
contribution for analyzing determinants of cultural goods trade.
3. OVERVIEW OF PAKISTAN ECONOMY
Since independence, the economic journey of Pakistan has faced numerous ups and downs.
Pakistan has passed through various critical circumstances and events which includes global as well as
internal challenges. The 1960s is considered to be the golden economic era of Pakistan so far. Pakistan
was perceived as an economic model and there was much applause for its economic development.
Until the decade of the 1980s, the Pakistan economy showed high growth rate of the GDP, averaging
close to 6 percent per annum. The 1990s is also known as lost decade for Pakistan. Economic growth
ranged between 3% and 4%.The worst period of the 1990s was 1993 when the GDP dropped from 8%
to 2%.In 2001-2005, the lifting of sanctions brought attractive foreign grants of about $1 billion to $1.5
billion per annum. The greater access to the markets of USA and EU countries helped achieving
significant rise in exports. Fiscal year 2007-08 was very tough for the economy of Pakistan. Global
+financial crisis continued along with the war on terror in Pakistan in year 2008-09 and fiscal year
2009-10.It was still in the recovery phase as far as GDP growth rate is concerned with a growth of
6
4%.Similarly, 2010-11 was also a struggling year for Pakistan. Although, the rate of inflation, slowed
down since last year but still it remained quite high during 2011-12.
The cultural goods industries are emerging as most rapidly growing economic sector in global
economy. It plays vital role in terms of export earnings, employment creation and generating income.
Every year, trade has been increasing throughout the world due to increase in production and sale. An
important portion of the global economy constitutes of cultural products, which is one of the vital
factors of growth in international trade. Unlike other goods, cultural goods and services can move
across international borders through various means, i.e., CDs, internet, etc. Therefore, determining the
cultural goods flow is much more complex as compared to other merchandise goods. It is estimated
that almost 7% of the World’s GDP constitute of creative industries and cultural goods alone.
In 2011 cultural goods trade reached to a new record of US$454 billion, which is more than
double during 2002 and 2011. Cultural sector grows by 8.8% annually and exports of cultural goods
were 8.8% in 20114 that is strong enough in developing economies (UNESCO, 2013).
Table 3.1 reflects Pakistan’s position during last decade, that can assist in future policy making as well
as determining set of actions required for improving trade in cultural goods. In the last decade Pakistan
do not focused on its trade in cultural goods until recent years. Although Pakistan has great potential in
its cultural heritage, but export figures are not reflecting with respect to its potential. Antiques highest
export was recorded US$ 31.25 million in 2008 and US$ 11.76 million in 2011. Similarly, Newspaper
highest export figure was recorded in US$ 1.38 million in 2003.
Ever since 2003 the export value of newspapers has been decreasing, till 2012. In 2012 the export value
for newspaper was recorded US$ 0.17 million. Books shows different export trend, and had very low
5 Press
release UNCTAD (May 2013). Trade in cultural products reached a new record in 2011.
7
inconsistencies as compared to newspaper. The export value were consistent between US$ 2.73 million
and US$ 2.31 million except year 2011 when export values of books dropped to US$ 2 million. Visual
arts, musical instruments and paintings has been fluctuating or decreasing till 2012. Jewelry shows very
different trend as compared to other categories. It has been increasing significantly every year. The year
2012 showed significant increase in overall export value in almost all categories.
Table 3.1: Exports of Pakistan’s Cultural Goods by Categories in (Million US dollars)
Other
Musical
News
Year
Paintings
Visual
Printed
paper
Crafts
Antiques
Jewelry
Books
matter.
Instrument
Total
Arts
2003
0.09
1.38
0.14
225.74
0.1
25.14
2.76
2.12
20.28
277.75
2004
0.18
0.71
0.32
258.23
0.23
29.04
2.76
2.71
12.68
306.86
2005
0.14
0.79
0.23
290.59
0.15
20.62
2.1
2.88
12.02
329.52
2006
0.28
0.21
0.1
247.61
0.29
24.06
2.73
4.42
8.13
287.83
2007
0.02
0.09
0.16
224.63
0.03
120.32
2.53
3.46
5.81
357.05
2008
0.14
0.07
0.26
189.08
31.25
239.83
2.3
4.19
7.3
474.42
2009
0.05
0.06
0.29
132.56
0.05
478.91
2.67
3.64
5.53
623.76
2010
0.12
0.03
0.11
132.5
0.12
590.24
2.47
3.58
5.2
734.37
2011
0.23
0.06
0.37
134.93
11.76
469.32
2
3.59
2.08
624.34
2012
0.09
0.17
0.3
121.24
0.09
1,634.07
2.75
3.18
2.86
1764.75
Source: UN COMTRADDE, 2013
The overall export value graph is shown in Figure 3.1 that exhibits gradual increase since 2007
onwards and significant growth in 2012. Jewelry is one of the main categories that has been playing
vital role by contributing in overall cultural goods export growth.
8
Figure 3.1: Pakistan’s Exports in Cultural Goods
Source: UN COMTRADDE, 2013
In today’s Era, almost all advance countries are focusing on trade in cultural goods and have
given it strategic importance. Their governments have been critically analyzing and performing research
for making effective policies for every sector. Unlike developed countries, developing countries have
been in state of ignorance and have not given due importance. Pakistan is not different from other
developing nations. Not enough attention and assistance is given to the producers of cultural goods.
This shows government’s lack of support in terms of regulations, legislation, Institutional support and
access to loans or funding, etc. Under these circumstances, policy framework and guidelines can help in
assisting and supporting the cultural goods trade industries for their growth. Ironically, Pakistan’s trade
and industrial policies are conspicuously silent regarding cultural goods producing industries and their
exports.
4. THEORATICAL FRAMEWORK
Given the nature and pattern of trade in cultural goods the Gravity model of International trade
is most suitable for this study. In applied International Economics this model of bilateral trade has
become the pillar and work horse (Evenett and Hutchinson, 2002).This model was basically motivated
by Newton’s law of gravity in which the gravitational forces utilized among two bodies is determined
9
by their distance and mass. Gravity framework was introduced by Tinbergen in 1962 and theoretical
foundation was provided by Anderson in 1979. It is commonly used as empirical instrument to study
the factors and patterns of bilateral trade, the so-called gravity model of International Trade. Gravity
models have been commonly used in researches of international trade, because of its popularity, easy
principles, accessible data and easy application in empirical studies. Gravity model is particularly useful
as by controlling variations, and it encompasses an appropriate framework to test marginal effect on
trade flows of other variables (Lewer and Van den Berg, 2007).
Exportpjtis taken as dependent variable and defined as the log of country cultural goods export
flows from Pakistan to country j.
The gravity equation represents one of the greater successes in empirical economics, as it
describes the value of bilateral trade, which is function of the market size of the importer as well as
exporter, and distance among them (Lili, 2011).Market sizes embody push and pull factors that affect
value of trade flows, and are usually characterized by GDP. And distance is generally measured by
geographic distance among two regions (absolute distance). Further methods for distance are a ratio of
two trading countries distance and one with other country (relative distances).It is anticipated that large
distance between trading partners leads to decrease in trade among cultural goods, as trade will become
complicated and bring transaction costs. The basic Gravity model is as the following
=
...
(1)
where, Tij is bilateral trade volume, for sum of exports and imports; Yi is country i's GDP; Yj is
country j's GDP.Dij is the distance among country i and country j; and G is a constant; and is
independent of any subscript as it links to a standard Gravity equation in the following form. The
multiplicative nature of equation (1) suggests that by taking logs it can made linear in parameters as
10
lnTij= lnG+ a1lnGDPi + a2lnGDPj + a3lnDij+ εij . . .(2)
Leamer and Levinsohn (1995) conclude that impact of distance on trade values is one of
clearest and robust empirical findings in economics. Different researches have been conducted to
analyze the impact of distance on trade flows. Teresa (2011) finds that when distance increases trade
among two countries decreases. Same results are derived by Lionteii and Patuelli (2010) and Disdier
(2010).
Different dummy variables are also incorporated in the model. Common language shows that
whether importing or exporting country share same language or not. Common language makes it easy
to collect material, build business relations and process of signing contracts become simple, thus
reducing transaction costs, and it causes positive impact of trade in cultural goods among two
countries. Moreover, cultural background seems to be similar when language is identical which specify
that exports of cultural goods are accepted by residents of another country. Two dummies of common
language are included in model. First deals with common official language of two countries(CLO).And
the second is based on the situation if at least 9% of the population in both countries spoke same
language (CLE) (Zigano and Mayer, 2006).
The languages that are spoken as official language in at least 3 countries, except English
language and spoken as a first language by 200 million people worldwide such as Arabic, Portuguese,
Spanish, Russian and French, are known as other world languages. Bilateral trade is always influenced
by sharing common language. Transaction costs decreases when dealing by speaking world language in
most part of the world. Increase trade is expected by lowering cost. As in trade world not every
language is mastered by every other country, therefore a common language or the official language
plays a vital role to enhance trade. So we expect positive sign, but we expect negative relationship as
11
well if knowledge of other countries language is preferred then English language. These results are
consistent with study of Lyenden (2011).
Those countries which share a common border are reflected by a unitary value of dummy
variable known ascontiguity(C). They are well aware of consumer’s choices and trading prospects.
Because of this reason it makes less costly in mutual trade.
Another dummy variable is colonial link (COL). There are different aspects that may be included:
to had a common colonizer (comcol). Or they belongs to either they belong to same country. Common
history, either of members of the similar country or similar colonial empire, upsurges the information
of partner’s organizations and business practices, and it reduces international trade costs. In these
cases, the expected impact is positive as a colonial relationship is prone to decrease cultural differences
among two countries. The system made under colonialism continued to operate within the third world
countries that was the basis of the capitalism. During colonialism, the countries of the third world had
to produce in surplus to accommodate European needs along with their own needs in exchange of
currency. Taxes were imposed by the colonizers on them to pay taxes and debts, and also buying
European goods from them. The effects of colonialism resulted in global economic system that
consists of banking and monetary institutions, commercialism which has strong hold and influence
over global trade. Lionetti and Patuelli (2010) and Cheptea (2007) find out a positive linkage among
trade flows and those countries which have colonial links or common border.
The dummy variable landlocked (LL) value is 1 if it is considered as a landlocked county whereas
0 otherwise. The transaction costs increases when the country borders are land-locked and reduce
trade. There may be one of the main reasons for a landlocked country is administrative barriers.
12
Area denotes the land area of country (or region). If land area is big it shows that country is big.
Due to this domestic market demand is high and imports less. So the expected impact of area on trade
is negative. The larger area of any country also indicates how much the country has the tolerance of
foreign cultures. Therefore, it is most likely that the land area as well as the trade flow cultural products
of any country is positively correlated.
GDP per capita5is a ratio of a country's gross domestic product and population, which can be
used to analyze a country's economic growth level and standard of living. GDP per capita demonstrates
purchasing power and welfare of country. Purchasing power of inhabitants causes positive impact on
volume of trade (Lili, 2011).GDP per capita effects trade in two ways. A large population shows a large
domestic market which exhibits high level of self-reliance and there is less need to trade. On the other
hand, a large population encourages division of labor which gives rise to economies of scale in
production and there is need and wish to trade with vast variety of goods (Eita and Ashipala,
2008).Cyrus (2011) and Lili (2011) find out positive relationship among GDP per capita and cultural
goods exports. Data sources and variable explanation are reported in Appendix A.
5. EMPIRICAL ANALYSIS
Following model is linked with gravity model in which total trade (export) among trading
partners is positively related with GDP while negatively related with geographic distance among two
economies. So now we can finally specify our model by focusing on model of Lionetti and Patuelli
(2010) and by adding dummy variables in standard gravity equation (2) which includes all the described
variables as follows:
Instead of GDP per capita country population is also used in literature in order to analyze the same effects. We
do not include this variable due to multicollinearity.
5
13
lnEXpjt= α0 + α1lnYpt + α2lnYjt + α3lnDpj + α4lnAREAj + α5Cpj + +α6CLOpj +
α7CLEpj + α8COLpj + α9SMCpj+ α11LLj …
(3)
Gravity model captures the development of trade flows with time and across countries, to
quantify and develop and a new standard for trade intensity. Form above model it shows independent
variables influence trade flows either positively or negatively. The above equation is helpful in relating
the variable to the model for the purpose of estimation. We anticipate all coefficients to be positive as
past and present economic and social links increases trade except distance and landlocked country.
While, the partner country GDP growth rate and area may exhibit positive or negative sign.
6. RESULTS AND DISCUSSION
Empirical findings reported in this chapter are based on cultural goods exports with 157 trading
partners (as shown in Appendix C) of Pakistan for the period 2003 to 2012. The analysis is further
extended for the sub-categories of overall cultural goods exports from Pakistan in terms of books,
jewelry, crafts and paintings, newspaper and other printed matter, musical instruments and visual arts.
As the data were bilateral trade data so panel data technique is used for the empirical analyses.
In order to calculate each category of cultural goods, we used trade value i.e. exports of cultural
goods as the dependent variable and estimated the Gravity model.
To quantitatively describe the main features of the data used in this study, we begin by
discussing summary statistics. We provide here measures of central tendency including mean and
median, whereas measures of variability include the standard deviation, and the minimum and
maximum values of variables.Table 6.1 elaborates summary statistics of Pakistan’s cultural goods trade
with reference to selected variables.
14
Table 6.1: Summary statistics6
Variable
Mean
Median
Maximum
Minimum
Std. Dev.
Observations
TV(total)
4784628
63605
1520000
10.000000
51944447
1165
TV(books)
40349.81
5014
690140
1.000000
102456.8
621
TV(jewelry)
14395455
15288
1.52E+09
12.000000
1.12E+08
239
TV(musical instruments)
51998.98
8641
879250
3.000000
125297.2
385
TV(visual arts)
105709.7
16845
5231345
5.000000
351742.8
774
TV(crafts and paintings)
2027119
97052.5
1.18E+08
17.000000
8558559
966
TV(newspaper &printed matter
13274.5
1497
336963
1.000000
37241.69
440
GDPI
4.328759
4.015908
7.667304
1.606681
2.094733
1165
GDPJ
4.363939
4.298589
46.500000
-17.668950
4.677664
1165
DISTANCE
6432.88
5308.435
16694.83
374.6522
3931.216
1165
AREA
987686.7
238538
17075400
25.000000
2393874
1165
COL
0.008584
0.000000
1.000000
0.000000
0.092289
1165
COMCOL
0.279828
0.000000
1.000000
0.000000
0.449108
1165
COMLANG_ETHNO
0.283262
0.000000
1.000000
0.000000
0.450776
1165
COMLANG_OFF
0.260944
0.000000
1.000000
0.000000
0.439338
1165
CONTIG
0.034335
0.000000
1.000000
0.000000
0.182166
1165
LANDLOCKED
0.169099
0.000000
1.000000
0.000000
0.375
1165
SMCTRY
0.017167
0.000000
1.000000
0.000000
0.129951
1165
DUMMY VARIABLES
Mean exhibits the average of data set. Mean value of jewelry is highest among all export
categories, which show the highest level of exports. Crafts and paintings have the second highest mean
value. Books have the lowest average value.
The mean value of distance shows the average radius of the circle of Pakistan’s exports of
cultural goods that is 6432 km (Distance is calculated from capitals of two countries). The maximum
6Values
of common variables are reported for the total cultural goods data set.
15
average distance of Pakistan export is recorded 16,694.83 km whereas minimum average distance
recorded to 374.65 km during 2003 and 2012. The average area of country that Pakistan exports to
during 2003 and 2012 is on average 987,686.7 Sq. km.
The dummy variables shows the dependency or effect on Pakistan’s Cultural Goods export that
includes colonial linkage, same country, land locked, contiguity, common language, official language
etc. If Pakistan had colonial link with partner countries (countries list is shown in appendix) then
average export is US$ 0.009 million. Countries having common official language average to US$ 0.26
million of cultural goods export.
6.2 Empirical Analysis
6.2.1 Unit Root test
We first evaluated the time series data in terms of their being stationary or non-stationary so
that we can approach a valid and reliable understanding about estimation of the model. Although
N>>T, sostationarity should not be a problem but we use Levin, Lin and Chu test to check stationarity
of variables. Results are shown in Table 6.2. The null and alternative hypothesis for conducting unit
root test is as follows:
:
Variables exhibit unit root.
:
All the variables are stationary.
Table 6.2 clearly indicates that all variables are stationary at level. So we reject null hypothesis
that variables exhibits unit root. Distance and area variables fail to show any result because they are
independent of time. Rests of variables included in the model are dummy variables.
16
Table 6.2 Unit Root Test
Variable
Level
Coefficient Probability
Order of Integration
TV
-98.27
0.0000
I(0)
GDPi
-11.27
0.0000
I(0)
GDPj
-36.86
0.0000
I(0)
6.2.2 Generalized Least Square:
We estimate the Gravity equation by means of the Common Constant method7. We tried
various alternatives depending on variable combination, econometric methods and data sources. But
Panel Estimated Generalized Least square (EGLS) is applied to estimate equation with country weights
and correction of standard errors for problem of autocorrelation and heteroscedasticity. This method is
suitable tool for unbalanced panel as it can handle a vast range of data that is unequally spaced (Baltagi
and Wu, 1999).
We tried both fixed and random effects models but results were not consistent as our data set is
unbalanced panel. Fixed effect model generates dummies equal to cross sections in the study. We have
157 cross sections and gravity model also consist of dummies so inclusion of more dummies leads to
an issue of singularity. That is why fixed effect model is not suitable for our study.
Pooled least square is the best method to apply if t-statistics, standard errors and probability are
quite good to explain results according to theory. And it should also satisfy BLUE (best linear unbiased
estimates) properties. If it does not fully satisfy these properties then GLS (cross section) is used to
tackle that problem. We also apply SUR (PCSE) to get rid of problem of autocorrelation. The common
constant method works under the principal assumption that “there are no differences among the data
sets of cross-sectional data sets. This method, also known as “pooled OLS” method, assumes the
common constant α for all the cross sections in the model.
7
Yu and Park.(2011), Chang et al. (2008) and Hwang(2012) also used pooled least square to estimate the Gravity
equation.
17
Generalized least square (GLS)is used for finding out unknown parameters in linear regression
model. GLS is used when variance of observations are not equal, i.e., hetroscedastic; then GLS is
applied. In this scenario Ordinary Least Square is misleading and gives wrong results.
In Table 6.3estimates for the determinants of the total cultural goods trade are presented, with
independent variables including that of gravity equations home and host country GDP’s, distance, area
and a set of dummies. The Gravity model variables are found to be statistically significant at 1%
significance level.
Table 6.3: Total Cultural Goods Exports
Dependent Variable: LOG(TV)
Methods: Panel EGLS (Cross-section weights)
Total panel (unbalanced) observations: 1164
Cross-section SUR (PCSE) standard errors & covariance (d.f. corrected)
Variable
Coefficient
Std. Error
t-Statistic
C
15.42654
0.619010
24.92133
GDPi
0.103590
0.029035
3.567735
GDPj
-0.069319
0.017915
-3.869371
LOG(DISTANCE)
-0.921862
0.058249
-15.82618
LOG(AREA)
0.302063
0.022882
13.20081
COMLANG_ETHNO
0.276463
0.099237
2.785881
CONTIG
0.075339
0.116200
0.648360
LANDLOCKED
-2.127878
0.146204
-14.55420
COL
4.759326
0.096127
49.51085
R-squared
F-statistic
0.699445
335.9869
Adjusted R-squared
Prob(F-statistic)
Prob
0.0000***
0.0004***
0.0001***
0.0000***
0.0000***
0.0054***
0.5169
0.0000***
0.0000***
0.697364
0.0000***
Table 6.3 shows regression results of Pakistan’s overall trade in cultural goods with its trading
partners. The result depicts that the home country’s GDP (Pakistan) is statistically significant at 1% and
have positive sign, which shows a direct relation between GDP growth rate in the home country and its
cultural goods export. What this implies is that when the economy grows it produces more goods and
by creating large exportable surpluses it exports more. The coefficient for the home country GDP
growth suggests that a 1% increase in Pakistan’s GDP growth leads to an increase in exports of cultural
goods by 0.10%. This result is supported by the findings of other studies including Disdier (20010) and
Yu (2011).
Trading partner GDP is negatively related with export of Pakistan’s cultural goods. This is
interpreted as 1% increase in host country’s GDP growth decreases Pakistan’s exports by 0.06%. The
18
intuition behind this result is that Pakistan’s cultural influence abroad is not strong enough, which can
create demand for its cultural goods. The larger economies have greater influence over smaller and
developing countries and are steering developing world. Transnational and Multinational Companies
are making money in developing countries, due to increase in commercialization trends, their cultural
imperialism flourishing resulting in consumerism promotion and fading local culture. This is not just
the case of Pakistan but also found in other developing countries. Secondly, larger countries have more
space for specialization and therefore decrease their imports from countries like Pakistan when their
own income rises or they start producing more of similar products in their territories. in this case
substitution effect is stronger than income effect. In today’s modern economy, the size of the country
is not strongly related to the amount of its specialization, but it is directly related to size of country’s
GDP. The result shows that countries with higher GDP will export more, due to greater production
space and cheaper as well. Similarly, they will import less if their domestic production is higher.
Similarly, due to piracy countries hijack other countries cultural heritage ideas, in the form of CDs
(audio visuals), crafts, etc. Because of all these arguments, the finding of partner country’s GDP having
a negative relationship with Pakistan’s cultural exports is justifiable.
According to our expectation the distance between Pakistan and importing countries is
statistically significant at 1% level and negative as well. It implies that the geographic distance is a
hindrance in bilateral trade flows of Pakistan. It indicates that a 1% increase in distance leads to 0.92%
decrease in cultural goods export from Pakistan to its trading partners. When country is far from
Pakistan then transportation cost increases for export so it tends to decrease export of cultural goods.
This is why to benefit from their competitive advantage; countries prefer to export to nearby countries.
Our result is consistent with studies of Frankel (1997) and Wall (1999). It may be noted that in this
study we do not consider trade in services of cultural goods that can be traded online and for such
trade distance is not the issue.
The regression coefficient of land area is 0.30 and is statistically significant at 1% confidence
level. It implies that when there is 1% increase in land area then its exports of cultural goods increases
by 0.30%. If a country has ample land, generally indicating of a big economy and big populations, it
leads to increase in domestic demand. To fulfill domestic demand, foreign cultural goods are also
accepted by local population, which encourages trade in cultural goods. Moreover, in large size
countries, cultural diversity is its hallmark and the residents have greater acceptability for a variety of
19
culture including foreign cultural goods, which causes greater import of cultural goods. Our empirical
result is same as that of Lili (2011).
In case of our regression results common language ethno shows direct linkage with exports of
cultural goods with statistically significant value. Coefficient is 0.27 which shows that if Pakistan has
common language with its trading partners then exports of cultural goods increases by 0.27% as
compared to other countries which do not have common language. This is because transaction cost
decreases if importing country’s language is same as of exporting country. Hence, trade is enhanced
with lower transaction cost.
Pakistan shares common border with India, Iran, Afghanistan, and China. According to our
estimated results coefficient sign is positive but insignificant. For countries with whom Pakistan has
common border then export of cultural goods increases by 0.07% as compared to rest of the
countries. These results are in line with our theoretical expectations and those found by Disdier (2007).
Dummy variable landlocked exhibits negative relationship with exports of Pakistan’s cultural
goods trade and is highly significant. According to regression results if country is landlocked export of
cultural goods of Pakistan decreases by 2.12% as compared to other countries who are not landlocked.
This is usual phenomenon with landlocked countries as the means of trade are not viable enough as
compared to other trading partners. Majority of landlocked countries are semi-isolated in participating
global trade because of lack of transportation means, roads, infrastructure, geographical anomalies,
extreme climate conditions, etc. Our results are consistent with studies of Jansen and Nordas (2004),
Dollar and Kraay (2003), and Francois and Manchin (2007).
The dummy variable colonial link is statistically significant at 1% level and comes out to be
positive. Its coefficient indicates for those countries where Pakistan had a colonial link its export of
cultural goods increases by 4.75 % as compared with rest of the other countries keeping other things
constant. Because of strong colonial ties European countries remain the main market of Pakistan’s
cultural goods exports. Our results are consistent with the study of Lionettiand Patuelli (2010).
R-square is used to measure the regression’s success in determining the values of dependent
variables. In our total cultural goods export case, R-square is 0.69, which shows that 69% variations in
dependent variable are explained by independent variables covered in the model. Adjusted R-square is
20
0.697 which is lower than R-square. F-statistic is also 335, which also show a good fit of the model.
Results of individual categories according to UNESCO definition are shown in Appendix B
7. CONCLUSION AND POLICY IMPLICATIONS
This chapter consists of three sections, first section draw conclusions based on the findings and
the second section presents recommendations based on empirical results. The third section throws light
on the future research prospects.
7.1
Conclusion
The empirical analysis is based on gravity model led us to conclusions that over all export in
cultural goods is strongly influenced from GDP growth in Pakistan. On other hand partner countries
GDP negatively influence growth of cultural goods export. Distance as expected negatively affected
exports of cultural goods, as distance increases cost of transportation of goods. Area of importing
countries boost exports of cultural goods exports because of bigger acceptability of different cultures
including foreign. Similarly exports of cultural goods increases with those countries with which
Pakistan had colonial link. Countries who share common language with Pakistan, import relatively
more cultural goods from it. Common border with importing countries is also a factor that promotes
export of cultural goods. Countries that are landlocked are generally isolated and thus import relatively
less from Pakistan then the rest of the world.
In case of books and Newspaper & Printed matter, cultural goods export is strongly influenced
from GDP growth in Pakistan for both categories. On other hand partner’s country GDP negatively
influence growth of cultural goods export in case of books. But for newspaper and printed matter
GDP of partner country positively influence cultural goods exports. Distance is consistently negative
and significant in all categories. Area is consistently positive and significant in all cultural goods
categories.
Exports in musical instruments are strongly influenced from GDP growth rate in Pakistan. And
partner country GDP has negative influence on exports of musical instruments. Both variables are
significant. Like above mentioned categories distances have negative impact and area has significantly
positive impact on exports of musical instruments.
21
Like other categories jewelry, visual arts and crafts & paintings also possess positive linkage of GDP of
home country with exports of these categories. On the other hand, partner country GDP is
consistently negative and significant in these categories. As expected and like above mentioned
categories distance has negative influence on these categories exports while land area has positive and
significant impact on these categories. Countries that are distant from Pakistan import relatively less
from it than countries that have relatively short distance. But countries who share common language
with Pakistan import relatively more of these categories goods.
7.2 Policy Implications
From the study it is evident that cultural goods exports have vast potential from Pakistan if
right policy actions are taken. On the basis of the findings of our analysis following policy implications
may be drawn;

To strengthen vocational training institutes and ensure provision of modern technologies to
increase production volume and quality of cultural goods.

To ensure the sophistication level of cultural goods export commensurating the trading partners’
income levels.

The distance variable is considered as a trade resistance factor or trade barriers such as market
access hindrance, delivery time, and cultural diversity. The supply of goods to foreign markets
will be higher with lowering of the resistance factors. This resistance factor can be reduced by
using modern electronic media and technological advancement, by broadcasting industries,
advertisement and promotions of products and services globally.

Trade with neighboring countries should be increased as lower transportation costs may lead to
an increase in demand for exports and imports.

Pakistan should exports cultural goods to countries having larger land areas to create excess
demand and bigger acceptability of different cultures including foreign cultures.

To create greater awareness of cultural goods through cultural exchange, media, trade
exhibitions, etc.

Government should concentrate on cultural goods exports to boost up Pakistan’s economy.
This leads to increase in GDP growth rate.
22

Countries having common languages have tendency to understand each other and it creates new
pathways for cultural goods exports. So there is need to export cultural goods with those
countries who share common language.

Pakistan should developing air freight capacity to facilitate and promote exports in landlocked
countries.

Pakistan has not adequate infrastructure and network of transportation that is hindrance for
cultural goods trade flows. So there is needed to focus on infrastructure that serves as the
prerequisite for trade. When infrastructure and network of transportation are improved, several
remote areas will be connected and cultural goods will come to the market ready to export to
international market.
7.3
Future Research Prospects
Although this research came up with promising findings, there are still many questions remain
open, which will help in further research. From theoretical point of view this study deals with few
explanatory variables. Therefore, for further enhancement and modification of this research more
variables can employ in the study which proved to be significant from past studies. (Variables table are
mentioned in appendix B). This table helps in selecting more variables for future research.
`
From methodological point of view, it is feasible to extend proposed estimation technique.
Generalized least square is simple method. Further Generalized methods of moment can be applied.
Or any other alternatives of panel estimation can be employed.
The empirical viewpoint is to extend this study to deal with balanced panel and more
comprehensive and complete data set on cultural goods trade flows. This study only deals with exports.
Another option is to include imports of these countries as well and/or increasing the number of years
under study. Due to missing data of piracy for some countries we could not include this variable in the
model. One can also work down on this sensitive issue as everyone is facing the problem of piracy
which is restricting trade of cultural goods.
23
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26
Appendix
A. Summary of Data Variables and Sources
Variable
Data source
Export of cultural goods
UN COMTRADE
Growth rate of GDP
Distance
Area
Common official
language
Common ethno
language
Definition
World Bank (World Development
Indicator)
CEP II (Centre d'EtudesProspectives
et d'InformationsInternationales)
Export flows from Pakistan to partner
countries.
Growth rate of GDP of Pakistan and
partner countries.
Distance between Pakistan and partner
countries from capital city.
CEP II
Country’s land area in square km.
Shows whether two countries share
common official language.
Shows whether 9% of the population of
two countries speaks same language.
Contiguity specifies whether two
countries share common border.
CEP II.
CEP II.
Contiguity
CEP II.
Landlocked
CEP II.
Whether countries are land locked or not.
Colonial link
CEP II.
Countries share colonial link or not.
Same country
CEP II
Whether countries belong to same
country or not
27
B: Individual Category Results
Variable
C
GDPI
GDPJ
LOG(DISTANCE)
LOG(AREA)
CONTIG
SMCTRY
LANDLOCKED
COL
COMLANG_OFF
R-squared
F-statistic
No. of observations
Musical
instruments
Jewelry
Visual arts
10.81988*** 13.23392*** 12.45317***
(1.607423)
(2.829634)
(0.754473)
0.149002*** 0.096057** 0.135496***
(0.032022)
(0.045737)
(0.047326)
-0.112768*** 0.098893*** 0.037926***
(0.018578)
(0.037761)
(0.013981)
-0.468076** 1.568454*** 0.677601***
(0.183749)
(0.329757)
(0.085415)
0.149689*** 0.699936*** 0.206697***
(0.02305)
(0.053404)
(0.020848)
3.266117*** 0.621901***
(0.688133)
(0.177068)
-2.902227*** 6.593509***
(0.403885)
(0.840408)
-2.214824*** 1.670197*** 1.952095***
(0.294244)
(0.29152)
(0.144642)
3.598144*** 2.90007*** 3.115939***
(0.140692)
(0.217915)
(0.194101)
0.120811
3.737919***
(0.115213)
(0.325239)
0.769949
0.704348
0.433499
157.3028
60.61782
83.73731
385
239
774
28
Books
21.22402***
(1.321552)
0.02596
(0.06345)
-0.003586
(0.020767)
1.809288***
(0.174928)
0.169348***
(0.033903)
1.627817***
(0.469107)
2.286794***
(0.288439)
3.955425***
(0.188582)
1.594269***
(0.198552)
0.232209
23.13652
621
Newspaper &
Print
10.41851***
(1.237455)
0.241554***
(0.033265)
Crafts &
painting
15.13304***
(0.559182)
0.151528***
(0.037085)
0.008505
(0.018731)
-0.071687***
(0.019511)
-0.755626***
(0.143148)
0.157957***
(0.034505)
-0.803194***
(0.078981)
0.244917***
(0.023573)
-
0.219701
(0.17575)
0.034226
(0.322359)
-1.359257***
(0.289381)
-0.97099***
(0.185445)
3.524505***
(0.262178)
0.392203**
(0.183838)
0.510356
56.15384
440
-1.352253***
(0.138445)
4.122904***
(0.117747)
0.577875
163.5915
965
C: Commodities included in the study
Domain
HS Code
Description
Collections and collectors' pieces of zoological, botanical, mineralogical,
970500
Antiques
numismatic interest
970600
Antiques of an age exceeding one hundred years
830610
Bells, gongs and the like
920590
Wind musical instruments (excl. brass-wind instruments)
920890
920290
Musical
920510
instruments
920600
Crafts
Fairground organs, mechanical street organs, mechanical singing birds, musical
saws and other musical instrument; decoy calls of all kinds; whistles, call horns
Guitars, harps and other string musical instruments (excl. with keyboard and
those played with a bow
Brass wind instruments (for example, clarinets, trumpets bagpipes)
Percussion musical instruments (for example drums, xylophones, cymbals,
castanets, maracas)
920810
Musical boxes
920190
Harpsichords and other keyboard stringed instruments (excl. pianos)
920110
Upright pianos
920710
Keyboard instruments other than accordions
970190
Collages and similar decorative plaques
491191
Pictures, designs and photographs
970110
Paintings and
anatomical, historical, archaeological, paleontological, ethnographic or
570110
581099
Paintings, drawings and pastels, executed entirely by hand, other than drawings
of heading
Carpets of wool or fine animal hair, knotted
Embroidery in the piece, in strips or in motifs: Other embroidery of other textile
materials
570190
Carpets of materials nes, knotted
570210
Hand-made rugs including Kelem,Schumacks,Karamanie,etc.
29
500720
Woven fabric >85% silk (except noil silk)
581100
Quilted textile products in the piece
580890
570232
580640
embroidery; other than knitted or crocheted
Carpets of manmade yarn, woven pile, not made up, nes.
Fabrics consisting of warp without weft assembled by means of and adhesive
(bolducs)
580631
Narrow woven fabrics: Other woven fabrics of cotton
581010
Embroidery in the piece, in strips or in motifs without visible ground
600293
Knit or crochet fabric of manmade fibres,nes.
580810
581091
581092
580610
580620
Braids in the piece; ornamental trimmings in the piece, without embroidery;
other than knitted or crocheted
Embroidery in the piece, in strips or in motifs: Other embroidery of cotton
Embroidery in the piece, in strips or in motifs: Other embroidery of man-made
fibers
Narrow woven fabrics: Woven pile fabrics (including terry toweling and similar
terry fabrics) and chenille fabrics
Narrow woven fabrics: Other woven fabrics, containing by weight 5% or more
of lastomeric yarn or rubber thread
580639
Narrow woven fabrics: Other woven fabrics of other textile materials
580632
Narrow woven fabrics: Other woven fabrics of man-made fibers
580900
Woven fabrics of metal thread and woven fabrics of metallized yarn of heading
580500
Jewelry
Other braids in the piece; ornamental trimmings in the piece, without
Hand-woven tapestries of the type Gobelins, Flanders, Aubusson, Beauvais and
the like and needle-worked tapestries
711320
Articles of jewelry and parts thereof of base metal clad with precious metal
711620
Articles of precious or semi-precious stones (natural, synthetic or reconstructed)
711319
Articles of jewelry and parts thereof of other precious metal, whether or not
plated or clad with precious metal
30
711411
442090
Articles of goldsmiths' or silversmiths' wares and parts thereof of silver, whether
or not plated or clad with other precious metal
Wood marquetry and inlaid wood; caskets and cases for jewelry or cutlery, and
similar articles, of wood; wooden articles of furniture
701890
Glassware articles including statuettes
960110
Worked ivory and ivory articles
Bone, tortoiseshell, horn, antlers, coral, mother-of-pearl and other animal
960190
moulding)
Visual Arts
442010
Statuettes and other ornaments, of wood
691310
Statuettes and other ornamental ceramic articles of porcelain or China
392640
Statuettes and other ornamental articles in plastic
830629
970300
490110
Books
Printed Matter &
carving material, and articles of these materials (including articles obtained by
Statuettes and other ornaments, of base metal, not plated with precious metal
(excl. works of art, collectors'' pieces and antiques)
Original sculptures and statuary, in any material
Printed reading books, brochures, leaflets and similar printed matter whether in
single sheets whether or not folded
490199
Printed books, brochures and similar printed matter
490191
Dictionaries and encyclopedias and serial installments thereof
490900
Postcards, printed or illustrated; printed greeting cards
490300
Children's picture, drawing or coloring books
491000
Calendars of any kind, printed, including calendar blocks
Newspaper
490210
490290
Newspapers, journals and periodicals, whether or not illustrated or containing
advertising material appearing at least four times a week
Other newspapers, journals and periodicals
31
S3H Working Paper
01:2014.
02:2014.
Exploring New Pathways to Gender Equality in Education: Does ICT Matter? by Ayesha
Qaisrani and Ather Maqsood Ahmed (2014), 35 pp.
An Investigation into the Export Supply Determinants of Selected South Asian Economies
by Aleena Sajjad and Zafar Mahmood (2014), 33 pp.
32