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ECONOMIC MULTIPLIERS OF EUROPEAN CAPITAL OF CULTURE PROJECTS:
GENERAL PRODUCT MODEL
Petar Filipić 1
Authors:
Branimir Vukorepa 3
1Professor of Economics, Faculty of Economics, University of Split, Croatia2Postgraduate student, program: European economic integration, Faculty of Economics, University of Split3Student, graduate degree programme in economics, Faculty of Economics, University of Split
Jasna Gluić 2
•The aim of this paper is to research the economic effects of achieving long-term and short-term economic results and the economic benefits of culture.
•The effective policy is expected to successfully balance between its traditional role - the promotion of art and culture and to contribute to the economic and social development.
Contents:
• Opening remarks
• Economic effects of the ECoC initiative • General product model
• Economic facts of the ECoC initiative
• (Un)measurable benefits of the ECoC initiative
• Macroeconomic effects of ECoC• Analysis of the ECoC's economic effects using the national
input-output table
• Macroeconomic multiplier ECoC
• Concluding Remarks
• Appendix: The Croatian city of Split as a candidate for the European Capital of Culture 2020
Key words: ECoC, economic effects, the general product, multiplier
1. Opening Remarks• The basic problems of the old city centers is taking
advantage of their market potential and at the same time preserving their cultural heritage as a type of cultural tourism.
• The point is that simple culture tourism contributing to the entrepreneurial development and afterwards to the economic development of the old city come before the renovation of the buildings.
• Europe needs a new approach in this field that will involve the cultural heritage of European cities in the overall commercial development of the old city centers.
•Kovač, B. (2001) Imago Europea and rethinking culture politics in EU, Informatologia, Croatian
Communication Association, Zagreb, 34, pp.15-26.
•Filipić, P. (2005) Inicijativa "Umjetnost u Gradu", HULU Split i DAS Split, str. 8.
Opening Remarks
What happened in previous ECoCs?
• the highest priority objectives:• needs to raise the international profile of the city and its region, • promote long-term cultural development, • increase the number of visitors from home country and abroad, • increase the interest in cultural activities at local audiences, • raise self-awareness of citizens and change their perceptions of their city.
• medium priority objectives:• making improvements to cultural infrastructure, • establishing cooperation with other European cities and regions, and • promoting creativity of local artists.
• lower priority objectives: • the economic development of the community and its social cohesion, • renewing the city’s image, • urban revitalization, • expanding markets for cultural events and general cultural environment, • etc.
Palmer/Rae Associates (2004) ECOC Study, Part I&PartII, Brussels, and Myerscough, J. (1994) EuropeanCities of Culture and Cultural Months: Research Study, University of Glasgow.
2. Economic effects of the ECoC initiative
• Speaking in terms of a modern model approach to the economic development, which asserts that certain regions, and even smaller countries, incline toward the model of development based on the "general product" instead toward the whole economic structure model, we could define that the typical
general product of a city (region) is "Cultural activity”.
• The general product (“natural product”) is a synthetic expression of services (or manufacturing and product) around which gather direct (production) services and indirectly many other activities that are built into those services (products) in its entirety or only partially.
2.1. General product model
2.1. General product model
1. The first and direct level of the general product consists of cultural events:
• Institutions in culture,• Amateurism,• Visiting programs, etc.
2.The second level of the general product consists of tourism:
• Hotel industry,• Hospitality industry,• Trade, • Traffic.
3.The third level consists of industry: • Food-processing industry,• Construction industry,• Many small manufacturing industries
2.1. General product model
4.The fourth level consists of a variety of services: • Agency services, • Banking services, • Intellectual services, • Craft services, etc.
5.The fifth level consists of various government and quasigovernmental institutions and agencies as well as other supporting institutions:
• Administrative and governing bodies,• Tourist Boards, • Expert and professional associations,• Expert advisory services, • Institutes and institutions for the development and quality control, • Educational and scientific institutions,• Citizens' associations, etc.
2.1. General product model
It is for this reason that the structure of the general product "Cultural activity" system can be represented as a star, concentrated around the elements of the supply.
In such a structure, it becomes a point that attracts and connects a part of the supply of other general products that will be defined and constructed within broader development strategies.
2.1. General product model
General product model can be displayed in the matrix (input-output) form : > > >
That allows not only the analysis of the interdependence of certain levels of the general product, but also the supply and demand generated by this product. 4
4 Filipić, P. (2008) Analysis of interconnectedness of goals in development documents at the local and
regional level, ERSA 2008: Culture, Cohesion and Competitiveness – Regional Perspectives, Liverpool, pp.
1-22.
2.2. Economic facts of the ECoC initiative
2.2.1. Level 1: Cultural activity
The Cities of Culture during the year generally realize approximately 300 to 500 projects in different cultural sectors -from theater and visual arts, classical concerts, popular music, to open-air festivals.
A wide anthropological definition of culture was often used in the attempt to bridge the gap between high and popular art and to target their programs at different sections of the population –children, young people, ethnic minorities...
The number of sold tickets..
2.2.2. Level 2: Tourism
• A year full of cultural events brought to the cities of culture a marked rise of day visits and overnight stays in the ECoC year.
• During the period from 1989 to 1994, the "cities of culture" reported an increase of 11.6% and a drop of -5.7% in the following years, while in the period from 1995 to 2004, the average growth was 12.7% and the average fall was 3.9%.
• The average reduction in tourist visits measured in the year after the ECoC year is much smaller than the growth in the year of cultural initiative.
2.2. Economic facts of the ECoC initiative
2.2.3. Level 3: Production activities
• The long-term economic impacts are infrastructural output projects and urban regeneration.
• ECoC initiative had a catalytic effect.
• Certainly many of the cultural buildings will serve their purpose when the ECoC annual program ends.
2.2. Economic facts of the ECoC initiative
2.2.4 Level 4: Services
• Glasgow where in 1990 there was a 7.8% increase in employment in cultural industries compared to 1986 and the total annual income from these activities was ₤ 304 million (Myerscough, 1991, p. 157).
• There is no available information on the revenue from agency, banking and intellectual services resulting from the ECoC.
• However, it is possible to make an indirect assessment using the increase in the number of tourists, but it is not necessary to make this assessment due to the nature of this paper whose primary aim is showing the method of the general product.
2.2. Economic facts of the ECoC initiative
2.2.5. Level 5: State and community organizations and associations
The share of public sector represents an average of 77.5%, ranging from 31% of Santiago's budget to 99% of Thessaloniki's budget. The average contribution of the national government amounted to 56.84%, of the city authorities to 19.59%, of the regions to 10.97%, and of the EU to 1.53%, or more accurately from 0.3% to 16%.
2.2. Economic facts of the ECoC initiative
Public Sector 77,50%
National government 56,84%
City itself 19,59%
Regions 10,97%
EU 1,53%
•Many values, namely, are the unmeasurable aspects of culture,
although they can be of economic importance and an incentive for
future business investments.
•Redefining or enhancing the image of the city and its perception
with domestic tourists and foreign visitors were on the list of
objectives of many capitals of culture.
2.3. (Un)measurable benefits of the ECoC initiative
3. Macroeconomic effects of ECoC
• The input-output model can help us to facilitate the decision or prediction whether the general product ECoC will be successful or not after its completion and to analyze its results.
• In fact, the general product can be structured into an input-output table of the national economy as a separate row and column and then using different assumptions its profitability in a defined time period can be measured.
3.1. Analysis of the ECoC's economic effects using the national input-output table
•Filipić, P. (1985): Primjena strukturnih modela u planiranju OUR-a (Input-Output in a Firm),
Logos, Split, p. 215.
3.2. Macroeconomic multiplier ECoC• The idea of a general product has its origin in business economics, in the
knowledge that businesses recognize the horizontal and vertical business relationships.
• GDP is the resultant of success.
• The main conclusions of this segment of the analysis are:
• A) The biggest importance is the personal consumption sector. From the previously analyzed levels, it covers the first and the second one: cultural activities and tourism. The third and the fourth levels of general product will benefit the most from this consumption.
• B) Significant resources generated by the ECoC, will flow into the budget at all levels (city, county and state) during the realization of ECoC.
• C) The effects in the sector of investment spending should not be small because the project does not stop after the initial investment.
• Finally, the three partial ECoC multipliers need to be summarized. The expression shows for how many units personal consumption will increase if the ECoC spends one unit (e.g. one euro).
ECoCECoCECoC GICtECoC
GDP
1
1t
C
ECoC
C ECoC
1 t
G
ECoC
G ECoC
1 t
I
ECoC
I ECoC
1
4. Concluding Remarks• The ECoC is a mega project with the capacity to attract
many visitors which requires considerable cash investments that can be returned to the national / regional treasury through the market (of cultural) tourism and also services of the creative cluster.
• In this paper, the cultural creative cluster gathered around ECoC is subjected to the analysis of economic effects. For this purpose, three economic analytical tools were presented: the model of the general product, input-output analysis and macroeconomic model.
Appendix:
the Croatian city of Split as a candidate for the
European Capital of Culture 2020
S P L I T
Appendix: the Croatian city of Split as a candidate for the European Capital of Culture 2020
We are witnessing the birth of a creative age. More than ever before, creativity is the engine of economic development. It is made out of a highly critical and mobile creative class that prefers an attractive, stimulating and vibrant environment to live and work in.
• In accordance with quite modern world and especially European trends, there is a desire in Split, Croatia to activate the existing critical mass of people, especially prominent individuals including artists, cultural workers, education professionals, publishers, librarians, and representatives of other professions which could contribute to confirming the contemporary nature in the city.
The Croatian city of Split as a candidate for the European Capital of Culture 2020
• Croatia, a country of many small regions, has all the possibilities to present itself attractively, as much with its natural assets as with its cultural heritage and every day cultural programs.
• The riches of cultural heritage,
• existing cultural events ,
• everyday life style.
• What we are doing in the city of Split is a relatively new approach, very comfortable for small countries on a lower level of economic development. Nevertheless, the economic and social bases of these changes were successfully created by the “City of Split Model” of cultural tourism.
Split as a city 1704 years old, the center of cultural and historical heritage and numerous international cultural projects starts its candidacy from a very high starting point. In the past forty years, many international sport and cultural events of world and European importance were organized in Split. Experience is not lacking.
References: Kovač, B. (2001) Imago Europea and rethinking culture politics in EU, Informatologia,
Croatian Communication Association, Zagreb, 34, pp.15-26.
Filipić, P. (2005) Inicijativa "Umjetnost u Gradu", HULU Split i DAS Split, str. 8.
Palmer/Rae Associates (2004) ECOC Study, Part I&PartII, Brussels, and Myerscough, J. (1994) European Cities of Culture and Cultural Months: Research Study, University of Glasgow.
4 Filipić, P. (2008) Analysis of interconnectedness of goals in development documents at the local and regional level, ERSA 2008: Culture, Cohesion and Competitiveness –Regional Perspectives, Liverpool, pp. 1-22.
5 Il sito ufficiale di Genova 2004 capitale europe della Cultura, p. 3.
6 Myerscough, J. (1991) Monitoring Glasgow Report, p. 94.
Filipić, P. (1985): Primjena strukturnih modela u planiranju OUR-a (Input-Output in a Firm), Logos, Split, p. 215.
