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The impact of deregulation on the movie box office after Taiwan’s entry into the WTO: the difference-in-differences estimation

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Abstract

This article estimates the impact of Taiwan’s Entry into the WTO on the movie box office. A sample of 2392 box office movies for the period 2002–2010 was examined by using difference-in-differences (DiD) models. The impact of Taiwan’s entry into the WTO on the movie box office was found to be negative by at least 1.83 million USD per year. Contrary to the normal perception of a preference for foreign (Hollywood) movies, the evidence based on a short-run analysis shows that Taiwanese preferred local movies. Compared to foreign movies, a local movie’s box office receipts were on average 2.03–2.41 % higher, ceteris paribus. The evidence corresponds to the discussion of the cultural premium.

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Notes

  1. The protection policy for the local industry was found in the Motion Pictures Act.

  2. There are cultural exceptions to the GATT principles for cultural goods and services. The cultural exception is to treat cultural goods and services differently from other traded goods and services. A notable example is France. France maintains quotas and subsidies to protect its cultural market from other nations’ cultural products, most notably American, in particular in relation to movies, television and radio.

  3. Although deregulation took place in 2002, the impact on the box office was felt the most in 2003. This paper focuses on an analysis of the real impact.

  4. According to Hollywood.com, 596 films were released in North America in 2011. The number of American films was 371, and 225 non-American films. Total box office receipts amounted to 10.157 billion US dollars.

  5. De Vany and Walls have contributed significantly to this area and their research is collated in De Vany (2004) which provides a useful survey of the literature. See, in particular, De Vany and Walls (1996, 1999, 2004). See also Walls (1997).

  6. Children over the age of six can see movies classified as protected. Teenagers can see movies classified as requiring parental guidance, but may watch them only with parental guidance. People over the age of 18 can see movies classified as restricted.

  7. The average exchange rate during the 2002–2003 data period was 1US$ = 34.3275 NT$. The average exchange rate during the 2002–2010 data period was 1US$ = 32.6128 NT$.

  8. Total box office revenues cover the film’s entire run, and they are classified according to the movie’s release date. Only 6 of the 1334 movie runs cover two calendar years. These movies include The Lord of the Rings: The Two Towers, Extreme Ops, The Hot Chick, My Big Fat Greek Wedding, Femme Fatale, and The Ring.

  9. The log specification of box office revenue is also employed to check the robustness of the findings. The results correspond to our findings, and they are available from the author upon request.

  10. In the DiD estimation, the coefficients of local movies (treated group) in 2003 (post-treatment) in the short run and local movies (treated group) after 2003 (post-treatment) in the long run were consistent.

  11. From this statistic, the evidence maybe partially reinforces that cultural premium which was caused by the same language in China and Taiwan.

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Authors and Affiliations

  1. Department of Economics, Shih Hsin University, No. 111, Sec.1, Mujha Rd., Wunshan District, Taipei, 116, Taiwan

    Wen-jhan Jane

  2. Department of Information and Finance Management, National Taipei University of Technology, Taipei, Taiwan

    Wei-peng Chen

  3. Department of Finance, Shih Hsin University, No. 111, Sec.1, Mujha Rd., Wunshan District, Taipei, 116, Taiwan

    Yuan-lin Hsu

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  1. Wen-jhan Jane
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  2. Wei-peng Chen
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Correspondence to Wen-jhan Jane.

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Jane, Wj., Chen, Wp. & Hsu, Yl. The impact of deregulation on the movie box office after Taiwan’s entry into the WTO: the difference-in-differences estimation. Eurasian Bus Rev 5, 289–308 (2015). https://doi.org/10.1007/s40821-015-0025-1

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