Music in the Air: Estimating the Social Return to Cultural Amenities

41 Pages Posted: 15 Feb 2020

See all articles by Oliver Falck

Oliver Falck

CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation

Michael Fritsch

University of Jena - School of Economics and Business Administration

Stephan Heblich

University of Stirling - Department of Economics

Anne Otto

IAB Rheinland-Pfalz-Saarland

Date Written: January 30, 2015

Abstract

If being around smart people makes us smarter and more productive, what can regions do to attract smart people? This paper considers endogenous cultural amenities as a location factor for high-skilled workers. To overcome selection in the provision of cultural amenities, we exploit the variation in contemporaneous cultural amenities stemming from baroque opera houses in Germany that emerged during a time when the decision for an opera house was mainly determined by the ruler’s preferences and rarely by funding constraints. To assess spillovers from high-skilled workers attracted by cultural amenities, we use a 1-percent sample drawn from the population of all West German workers under social security during the period 1975-2010. This panel of individual observations allows us to compare wages of similar individuals who work in locations with different levels of high-skilled workers who are attracted by cultural amenities. To account for non-random selection of workers among cities, we use individual-location fixed effects. Our results show that cultural amenities are an important factor in the location decision of high-skilled workers. The positive effect of the local share of high-skilled workers on unskilled, skilled and high-skilled wages indicates strong and productive spillovers.

Keywords: cultural amenities, social returns, higher education

JEL Classification: I200, J300, Z100

Suggested Citation

Falck, Oliver and Fritsch, Michael and Heblich, Stephan and Otto, Anne, Music in the Air: Estimating the Social Return to Cultural Amenities (January 30, 2015). CESifo Working Paper Series No. 5183, Available at SSRN: https://ssrn.com/abstract=2559757

Oliver Falck (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation ( email )

Poschingerstr. 5
Munich, 81679
Germany

Michael Fritsch

University of Jena - School of Economics and Business Administration ( email )

Carl-Zeiss-Str. 3
D-07743 Jena
Germany

Stephan Heblich

University of Stirling - Department of Economics ( email )

Stirling, Scotland FK9 4LA
United Kingdom

HOME PAGE: http://www.management.stir.ac.uk/people/economics/academic-staff/dr-stephan-heblich

Anne Otto

IAB Rheinland-Pfalz-Saarland ( email )

Regensburger Strasse 104
Nuremberg, D-90478
Germany

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