Culture Shocks and Consequences: the causal link between the arts and economic growth

Is there a relationship between local arts and culture production and local prosperity that is permanent rather than transitory? The answer to this question determines whether arts and culture production generates economic growth or a temporary ‘multiplier’ effect that diminishes over time. We argue that despite the obvious public policy interest in the subject there has been no fully satisfactory empirical analysis of this question. In this paper we provide a model that allows us to think systematically about the problem and an empirical methodology capable of testing relevant hypotheses concerning possible answers to the question. We identify data to which these methods can be applied, using per capita GDP and expenditure levels of arts and culture production by not-for-profit organizations in US urban areas. Our analysis suggests that the impact of arts and culture production is not transitory. Shocks to local arts and culture production generate impacts that alter the local economy and change steady-state GDP.