Cultural Policies and Fiscal Federalism

Abstract

Fiscal federalism and public choice theories offer a number of approaches to explaining differences in public expenditure on cultural affairs. This paper empirically explores cultural expenditure in the nine federal provinces of Austria. the methodological set-up is a time-series panel data analysis for cultural expenditure from 1976 to 2002. A number of papers have shown that the main driving forces behind cultural expenditure are Baumol's cost disease and economic growth, and these results are also corroborated by the current study. Moreover, differences between the federal provinces do exist, implying that cultural policies are determined partly by local and regional circumstances. Arguments from recent public choice theories, such as the form of government (e.g. coalition governments) and economic business cycles, do not offer much explanation. However, variables capturing the ideology of policy makers and the sustainability of budgetary policies can explain some of the differences in cultural policies between Austrian provinces.