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Culture Shocks and Consequences

The causal link between the arts and economic growth

January 28, 201528 January 2015

Business support for the arts / Economic and social benefits

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Using historical data from 384 American metropolitan areas, the exploratory research in this report examines whether an increase in the spending of local not-for-profit arts and culture organizations has a long-term, positive impact on the local economy.

The authors state that, in the short term, it is fairly obvious that cultural production has a positive economic impact. But they also note that, over the longer term, spending on culture could, in theory, crowd out other types of economic activity. For example, “an increase in available live performing arts programming may lead eventually to reduced attendance at carnivals or sporting events”, and individuals’ spending on “museums might eventually crowd out amusement parks or even shopping centers”. On the other hand, if “the arts and culture stimulate creativity or attract and retain creative and productive workers”, there might be longer-term economic effects.

As part of their analysis, the authors examine the direction of the connection between local per capita Gross Domestic Product (GDP) and per capita spending by local arts and cultural organizations. Does an increase in local GDP lead to higher spending by cultural organizations, or vice-versa?

While not the main focus of the analysis, the report does note that per capita cultural production varies considerably between metropolitan areas (much more than per capita GDP). The metropolitan areas with the highest spending by cultural organizations are Washington (D.C.), Pittsfield (MA), New York City, and Santa Fe (NM).

The empirical data lead the researchers to conclude that:

  • There is a positive relationship between per capita cultural production and per capita GDP, resulting in “a permanent increase in per capita GDP”. (The authors note that, “in the context of our model, asking whether cultural spending ‘causes’ economic prosperity is asking whether transitory innovations or ‘shocks’ [in cultural production] … cause permanent changes” to per capita GDP.)
  • The positive connection between cultural production and GDP exists in all regions of the United States.

Because this was the first test of their methodology in analyzing the connections between cultural organizations’ spending and economic growth, the authors conclude that “these results should be interpreted with caution.”

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