Expert Commentary

Cultural attractions, human capital and economic growth

2010 paper by the Institute for Economic Research at the University of Munich on cultural sites and how they shape local economies.

The number of well-educated residents that areas draw can have a bearing on economic vitality, and yet local and regional planners must consider how far they should go in appealing to residents who will bring such “human capital.” One outstanding question remains precisely how cultural amenities such as museums and theaters translate into value beyond aesthetic enjoyment.

A 2010 paper by the Institute for Economic Research at the University of Munich, “The Phantom of the Opera: Cultural Amenities, Human Capital and Regional Economic Growth,” examined the population trends surrounding 29 Baroque-era opera houses in Germany, all built before the industrial revolution, to determine the effect that such cultural institutions had on the present population make-up. The researchers also analyze the effect of local human capital on a location’s growth.

The study’s findings include:

  • Controlling for historic university locations, ethnicity, religion and several other variables, the proximity of an opera house is a strong predictor of a region’s share of high-human-capital employees. For every 10 kilometers nearer to an opera house, the region’s share of employees with a university degree increases 0.3 percentage points.
  • These results are reinforced when tested against a carefully selected and matched group of 29 “twin” regions without baroque opera houses.
  • A modest increase in the level of high-human-capital employees increases average annual growth of regional GDP per capita by between 1.0 to 2.1 percentage points.

The authors advise that policymakers should take into consideration their cultural offerings as they compete for high-human-capital individuals. Still, the researchers caution that regional officials should “carefully consider the possibility of unwanted side effects from redistributing resources to cultural amenities at the expense of other public spending or increased taxes because such a policy could result in relocation decisions by firms or individuals that do not value cultural amenities.”

Tags: arts, entertainment, creative class, gentrification