Due to geographic differences some location might be better positioned to benefit from a temporary export boom. In a setting with scale economies the resultant labor re-allocation might have long run influences even if the export boom is only temporary. I evaluate the strength of this mechanism from a historical natural experiment.
We document two stylized facts for the international movie market. Firstly, that the share of revenue of sequels and adapted - non-original - content has increased dramatically over the last two decades, and that furthermore the global market has become geographically more diverse. We propose that this situation can be explained by considering a setting where firms face a global market where countries have horizontally differentiated taste, yet the firm has to release one global good for all markets. In this setting the firm needs to decide on the profit maximising location in the taste space that is populated by the consumers of the individual countries. If furthermore the firm faces production uncertainty, that affect the realized position of the product in the taste space, then there is a mean-variance trade-off between goods that provide more uncertainty but a better expected position, versus goods that are safer but have a worse expected position. In this setting the rise of the East Asian market has changed the taste diversity that the firms are facing, and sequels provide a safer option to hedge against this spatial risk. We propose a way of estimating this model and the production uncertainty based on a random utility framework.