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Capital of culture?

An econometric analysis of the relationship between arts and cultural clusters, wages and the creative economy in English cities

Nesta Working Paper 14/06
Issued: August 2014
JEL Classification: L82, R11, R58
Keywords: Wage premia, cultural clusters, creative placemaking

Abstract

In recent years, scholars and consultants have argued that the arts and cultural sector can boost productivity in other sectors of the local economy, but the evidence base underpinning these claims is still sparse, and mostly confined to the US.

In this paper, we build an econometric model that explores the impact of cultural clusters on the productivity of English cities using employment, occupational and institutional measures. Our analysis reveals a negative link between cultural clustering and wages, which we interpret as evidence of a compensating differential - skilled workers sacrificing higher salaries to live in places with vibrant cultural scenes.

However, when we consider interactions between cultural clustering and salaries in creative industries and occupations, we find some evidence that creative workers in cities with high levels of cultural clustering enjoy a wage premium, which suggests that not-for-profit arts and cultural sectors may be generating knowledge overspills into the commercial creative economy.

The final version of this paper was published as a Chapter in Michael Rushton, ed. Creative Communities: Art Works in Economic Development (Washington, DC: Brookings Institution Press 2013)

Authors

Hasan Bakhshi, Juan Mateos-Garcia and Neil Lee (LSE)

Authors

Juan Mateos-Garcia

Juan Mateos-Garcia

Juan Mateos-Garcia

Director of Innovation Mapping

Juan leads a team of data scientists, developers, visualisers and innovation experts who use new datasets, analytics methods and visualisation tools to inform innovation policy.

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Hasan Bakhshi

Hasan Bakhshi

Hasan Bakhshi

Centre Director, Creative Industries Policy and Evidence Centre (PEC); and Executive Director, Creative Economy and Data Analytics, Nesta

Hasan oversees Nesta's creative economy policy, research and practical work.

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