The Value of Culture.ppt

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					Conference European Capital of Culture, Maribor,
September 21-23, 2012




               The Value of Culture


                             Bruno S. Frey
                     University of Warwick,
                              and
      CREMA – Center for Research in Economics and the Arts
European Capitals of Culture
European Capital of Culture
          2012
European Capital of Culture
          2012
 European Capitals of Culture

  “The European Capital of Culture (…) has advanced to
    being the most popular and admired event in the
             European Union” (Mittag 2008)

•On average 500 cultural projects

•Cultural operating budgets up to €74m (Lille)

•Capital expenditure up to €230m (Thessaloniki)

•Total expenditure between 1995 and 2004 €3.75b

•Copied around the World
             Cultural Impact
• 500 projects per year (Palmer 2004)
   – Theatre, visual arts, music, street parades, open-air
     events, heritage and history as well as architecture
   – Recently also sport, food and crafts


• Expansion of cultural infrastructure
   – Restoration and construction (on average 5 new venues)


• Successful in attracting visitors
   –   Lille 600.000 at opening event
   –   Between 1.1m (Luxemburg) and 7m (Copenhagen)
   –   Many free events: 30% (Helsinki) to 70% (Salamanca)
   –   Use of public space
            Economic Impact
Infrastructure (Mittag 2008)
•Improvements in all cities
But: Difficulties due to short realization time

Financial structure (Palmer 2004)
•Average cultural operating budget €37m (€8m-74m)
•Average capital expenditure €107m (€8m-230m)
•Public sector covers most expenditures


Economic impact
•12% increase in tourism in event year (-6% to 56%) (Palmer
2004)E.g. impact for Liverpool £750m (Garcia et al 2010)


But: Problems of impact studies
Critical Aspects of Impact Studies

• Revenue instead of value added
• Substitution (time or place switcher)
• Funded by taxation
   – Crowd out private expenditures
   – Opportunity cost / alternatives
• Multiplier?

• Mega-events should increase welfare not
  economic indices!
 Life Satisfaction Approach
• Life satisfaction

   – Subjective self-evaluation
   – Approximation of utility with subjective well-being
   – “How satisfied are you with your life as a whole?”

   – Captures externalities
   – Works for market failures and anomalies
   – Represents experienced utility better than indirect
     measures
   – Individuals weigh advantages and disadvantages
     with relative importance
          Related Studies
• Frey and Meier (2006)
  – Positive correlation of cultural visits and life satisfaction
  – Causality unclear


• Kavetsos & Szymanski (2010)
  – Olympic and football events in Europe (1976-2000)
  – Hosting major sport events increase life satisfaction
     • Significant, but short-term effect
                      Data
• Eurobarometer and BAK Basel 1985-2002

Dependent:
• Life satisfaction

Independent:
• Socio-demographic (gender, age, age2, marital
  status, #children, occupational status)
• Income
• GDP per capita (NUTS II)
• Treatment: Dummy for ECOC
• 1985-2002

• 15 countries

• 24 ECOC
Average Life Satisfaction




                  ***
                         Model

• Difference-in-Difference
  – Multiple groups and time periods

  LSi,j,t = b0 + b1xj,t + b3zi,j,t + b4gj,t + yt + rj + nt + ui,j,t

  –   xj,t treatment dummy
  –   zi,j,t individual specific covariates
  –   gj,t region covariates
  –   yt year fixed effects
  –   rj region fixed effects
Announcement & Legacy
•   No pre-selection
    effects
•   Cities not
    systematically different
•   No pre-selection
    effects
•   Cities not
    systematically different


•   No announcement
    effects
•   No pre-selection
    effects
•   Cities not
    systematically different


•   No announcement
    effects


•   No post-event / long-
    term-effects
            Explanations

Local Residents
  – more congestion
  – more noise, trouble
  – higher prices
  – more crime
                      Result

NO argument against European Cities of
Culture Programme
  a) shows problems
     provides incentives
    -   to overcome

    -   and to analyze exact manifestations
                     Result

NO argument against European Cities of
Culture Programme
  b) people beyond residents
    -   wider area
        including Europe World
        “culture” is a global public good

    -   incoming tourists
        may greatly benefit
                  Conclusion

European Cities of Culture
is a fascinating programme
Problem: Residents (on average) suffer
reductions in life satisfaction
Consequence
  • adjust programs
  • (possible) welfare gain
     - wider area
     - tourists
Backup
GDP per capita
Unemployment

				
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posted:2/16/2014
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