Cultural Capital Externalities: Causal Evidence From a Danish Ticket Scheme for Theatres

ABSTRACT Governments in most of the developed world fund arts and culture. Theoretically, the arguments for doing so are based on the arts and culture being public goods or providing positive externalities. The size of the externalities for a variety of cultural goods has been empirically investigated in numerous stated preference studies. However, the existence of externalities has not previously been tested as a causal relation. In this paper we are testing the existence of externalities of cultural consumption (cultural capital externalities) for Danish theatres. We are doing this based on a theoretical model, where a private consumption jointly produces private and public goods. We exploit variation generated by a national ticket purchasing scheme to estimate the causal effects of theatre consumption on public returns. We find that there are significant cultural capital externalities for users, but we find no effects for non‐users, pointing towards peer‐effects rather than externalities. Even though there are some limitations to our study, it shows that it is possible to test the existence of externalities of cultural consumption in an empirically convincing causal set‐up.