Cities often provide amenities such as cultural institutions
and quality education to attract highly talented people --
succintly termed by Florida (2002) as the creative class. We
analyze both theoretically and empirically the role of
publicly provided goods as amenities for the location
decision of the creative class. In the theoretical part we show that
in an open economy with competing cities spending on public goods
capitalizes in the wages of immobile workers. In equilibrium,
spending on amenities is higher in the open economy compared to
the closed city, but utility of immobile workers is lower, as public
good spending tends to be above the first best level. In the
empirical part we combine a large survey data set of about
half a million German individuals with data on city subsidies to
theatres. We find that mobile individuals are better educated
and find cultural offerings important for their mobility decision.
Moreover, public subsidies have a positive effect on mobility of
those individuals who find cultural offerings important. Consistent
with the competition hypotheses, public subsidies to neighboring
cities exert a negative effect.
Dieser Eintrag ist Teil der Universitätsbibliographie.
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