Crash Landing on You: An Error-Corrected Approach to the International Trade Creation Effects of the Korean Wave

Abstract

The dissemination of Korean popular culture—namely television dramas and K-pop music—across the world over the past two decades has coincided with the strengthening of South Korea’s efforts at economic globalization as an Asian Tiger. The dominant explanation for this trend is that a shift has occurred in the cultural preferences of international consumers, motivated by the increased global viewership of K-dramas and other Korean cultural exports, thus leading to an increase in demand for South Korean commodity imports such as food, clothing, and cosmetics. Previous research has assumed that the consumption of Korean popular culture and the international demand for Korean imports are two non-integrated, stationary time series; however, this leaves the analysis vulnerable to spurious regression and misleading conclusions drawn based on the presence of unit roots rather than an actual causal relationship. This paper attempts to remedy this oversight by using panel data from Google Trends and the WTO to perform an error-corrected DOLS regression analysis. The findings of this study indeed reveal the existence of a cointegrating relationship between the Korean Wave and international demand for South Korean imports. However, the error-corrected regression outputs nevertheless report that greater K-drama popularity still leads to an increase in the import of South Korean goods. These results have strong implications for consumer behaviors as they reflect the interaction between cultural and commodity trades and provide important insights into how South Korea’s “soft power” cultural diplomacy has stimulated its rapid economic development and globalization.