Impact of opera houses on city/region growth

Ifo Institute for Economic Research in Munich economists have a nice study on the topic (HT: Economix Blog).

The paper looks at German cities that built Baroque opera houses built before 1800. They say these houses attracted well-educated workers who prefer to live near cultural amenities. Moreoevr, proximity to an opera house can increase regional growth by as much as 2 percentage points.

They try and analyse via different ways to seperate a few factors like:

• By limiting themselves to venues constructed before the advent of the industrial revolution, the authors sought to eliminate the possibility that opera houses were a result, rather than a cause, of regional economic growth.
• The study corrected for other factors that might explain higher growth, like the presence of a university or seaport.
• The authors also looked at regions with similar characteristics, minus the opera house.

Minus all these too, presence of opera houses was seen as a major factor for attraacting talent which lead to higher growth.

There are some interesting aspects as well like Baroque nobles often borrowed heavily to finance their ornate musical palaces. There was some kind of rivalry to build these places so that it coudl attract the best musicians.

Like Italy, Germany was a loose collection of independent fiefs until the middle of the 19th century. Music was a weapon in the aristocrats’ fierce competition for prestige, helping to account for the disproportionate number of Baroque operas from German and Italian composers as compared with France, which was more centralized.

The authors in the end say:

Our advice to local policymakers is to be aware of the value of cultural amenities when competing for high-human-capital individuals. However, local policymakers should also 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.

Hmm.

I am wondering whether all these cultural amenities matter to Indian population? I doubt it as then talented people should be prefering to stay in Agra, Jaipur etc instead of Delhi, Mumbai etc. Delhi and Mumbai are places endowed with cultural amenities as well but people do not live here because of them. It is because of the opportunities they provide to the talented people to grow in their fields.

I think somwehere down the line it boils down to average income levels. Germany is a developed country with people having high per capita incomes. When you have high income levels like that then may be cultural amenities would matter more. With high incomes you want quality places to spend your income.