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City competition for the creative class

Author

Listed:
  • Thiess Buettner

    (University of Erlangen-Nuremberg)

  • Eckhard Janeba

    (University of Mannheim)

Abstract

This paper explores the conditions under which decentralization and fiscal competition lead to a policy of providing public amenities in order to attract highly productive labor. It provides a theoretical analysis which shows that the incentive to provide such amenities is particularly strong, if institutional restrictions prevent local governments from adjusting their tax structure. The empirical analysis considers the case of Germany, where public subsidies to local theaters are shown to exert a compensating earnings differential for highly educated labor. Taking account of the institutional setting, our empirical results suggest that local jurisdictions in Germany are subject to a substantial fiscal incentive to subsidize cultural activities.

Suggested Citation

  • Thiess Buettner & Eckhard Janeba, 2016. "City competition for the creative class," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 40(4), pages 413-451, November.
    • Handle: RePEc:kap:jculte:v:40:y:2016:i:4:d:10.1007_s10824-015-9258-1
    DOI: 10.1007/s10824-015-9258-1
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    More about this item

    Keywords

    Fiscal competition; Creative class; Cultural amenities; Theater subsidies; Tax autonomy; Capitalization; Individual earnings;
    All these keywords.

    JEL classification:

    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • Z18 - Other Special Topics - - Cultural Economics - - - Public Policy
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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