Motion Pictures Industry: Economies of Scale and Trade

Abstract

Recent economic theories find industrial structure to be an important determinant of the pattern of trade. In the motion picture industry, economies of scale and imperfect competition, in addition to cultural sovereignty, are conditions sometimes used to justify protectionist policies. This paper examines the significance of the capital-labor ratio, VCRs, market share, tariffs, domestic market size, taste similarities, stars and domestically popular films on international trade in the industry. The results indicate that stars and blockbusters in the domestic market do not seem to influence consumption of films overseas, however, external economies of scale are present in the industry, tariffs are effective trade barriers in the industry, and VCRs increase the chances of piracy.