CONSUMPTION CAPITAL: THEORETICAL MODEL AND EMPIRICAL ESTIMATION Victoria M. Ateca Amestoy Universidad de Málaga & IESA - CSIC EHU-UPV, June 2005

INTRODUCTION ON CULTURAL GOODS DEMAND AND VALUATION ISSUES

GENERAL PURPOSE Cultural goods demand: The role of tastes. Determinants of demand Effect on different periods. Methodologically: How can we characterize diverse behavior? INTRODUCTION

SPECIFIC AIMS Study the determinants of the production and consumption of cultural appreciation and of the demand of cultural goods. – Explain differences on the observed market behavior. – Present methods to estimate such models. – Analyze the influence of public intervention on the consumption of cultural goods. INTRODUCTION

ASSUMPTIONS CULTURAL CAPITAL AND HOUSEHOLD PRODUCTION FUNCTIONS. – basic need: cultural appreciation – demanded good: cultural good RACIONAL ADDICTION. – temporal dimension SOCIAL DIMENSION OF CULTURAL CONSUMPTION INTRODUCTION

THEORETICAL APPROACH RATIONAL ADDICTION “Cultural Capital and Demand”

RATIONAL ADDICTION AND TASTE FORMATION THEORETICAL APPROACH Literature – Rational addiction: Stigler y Becker, JPE 1977 – Learning-by-consuming: Lévy-Garboua y Montmarquette, JCE 1996 y HCE Our approach – Cultural appreciation: argument of utility function – Cultural goods: objects of choice – The relevance of cultural capital to satisfy cultural need – Individual cultural capital accumulation function

MODEL AND FOCUS THEORETICAL APPROACH Model What are we looking for? Who do the determinants of demand operate in each period. The relationship between consumption on two periods. The influence of early consumption on subsequent cultural demand Effect of different cultural policies.

RESULTS: DETERMINANTS OF DEMAND THEORETICAL APPROACH Specific effects of addiction: the role of cultural capital High level of initial cultural capital endowment: the agent is more productive to satisfy her cultural need by means of the production and consumption of appreciation

RESULTS: EFFECT OF PAST DEMAND ON PRESENT DEMAND THEORETICAL APPROACH Model fits an empirical regularity: the consumption on the adult period depends positively on young consumption.

RESULTS: VITAL PATH FOR CULTURAL CONSUMPTION THEORETICAL APPROACH Cultural good on the first period: consumption good investment good SHADOWED: demand for cultural goods is greater on the second period 45º: demand path would be constant if cultural good were not addictive

RESULTS: THE ROLE OF CULTURAL POLICIES THEORETICAL APPROACH Effects of an increase on the endowment of cultural capital: consumers: individual demand – falls in the first period – rises in the second – effect over vital demand is negative if the government increases s providing young consumers with cultural goods: positive effect for the productive sector. Transfers: gift – units of cultural goods positive for supplier Government: demands cultural good that transfer to the consumer Above what is individually demanded: merit goods

RESULTS: ON THE ROLE OF CULTURAL POLICIES THEORETICAL APPROACH Overlapping Generations. Dynamic effects of changes on initial endowment: Adult consumption = initial capital endowment for her child Result There exists a stationary point that does not depend on cultural parameters The effectiveness of cultural policy measures: Only on the short run Stationary point that depends on price and income

CONCLUSIONS THEORETICAL APPROACH The conclusions derived the theoretical model on cultural need satisfaction and demand of cultural goods are the following: Cultural capital parameters. Efficiency on the production and consumption of cultural appreciation experiences. Demand for adult agent is increasing on the cultural demand of the first period (although decreasing paths are more common). Demand in the first period: double purpose (consumption good and investment good). Active cultural policy (if Government demands cultural goods and redistribute them) beneficial effects for cultural goods suppliers. This policy only effective in the short run: dynamic system has a stationary point. However, it can also influence the level of the point.

“A Model of theater participation”

THEATER PARTICIPATION What we study Analysis of the demand of a cultural good: Market good Intangible, integrated into cultural capital by a process of mere memory. Why do individuals participate and which are the determinants of the intensity of demand Literature on “participation in the arts” – Demand models – Cultural capital models – Others

SETUP & OBJECTIVES OF THE MODEL THEATER DEMAND Survey of Public Participation in the Arts 2002 USA We explain theater attendance in terms of variables Test econometrically Cultural capital Cultural preferences Social capital Participation by other cultural goods Socio-economics Socio-demographics 1.Hypothesis derived form the theoretical model: relevance of cultural capital 2.Hypothesis related to time (productive factor) 3.Regularities reported in the literature

METHODOLOGICAL CONTRIBUTION THEATER DEMAND ZERO INFLATED NEGATIVE BINOMIAL MODEL Sobredispersion and zeros in the dependent variable distribution: Implications How can we interpret excess of zeros for the dependent variable? Behavior of two distincts subpopulations Those who never go Those who may go Constraint maximization. Interpretation: corner solutions (some agents consume zero units because of some restriction) other ones reach their unconstrained maximum at zero (do not consider the good to satisfy their need)

ESTIMATION RESULTS THEATER DEMAND Never goGo more times Demographic Age (+) Sex (+) Age (+) Sex (+) Socio-Economic resource availability Income (-) Occupation (-) Household composition Household size (-) Family participation Other go (+) Habitat Central (-)All (+) Cultural capital initial endowment own past investment Education (-) Parents education (-) Education (+) Other types of participation relation with other goods Consumption of other supports (-) Acting (-) Go more (-) Adult classes (-) Consumption of other supports (+) Go more (+) Adult classes (*)

ESTIMATION RESULTS THEATER DEMAND The relevance of variables that determine cultural capital influence more on the binary decision of participation, that on the intensity. examples: parents education, values of the coefficients of participation under other goods. Implications We can disentangle the effects of different policies: Some policies for increasing participation will just make that hose who already participated would consume more units; whereas other policies will change the behavior of non-goers

CONCLUSIONS THEATER DEMAND The conclusion that we have obtained for this participation behavior model have been: Jointly estimate the market behavior of two subpopulations. Zero Inflated Negative Binomial Model – probability that an agent never goes, and – probability of going a given number of times. Some variables are deterrence variables for participation. Socio-cultural variables accommodating individual cultural capital play a key role. Phenomenon such as feminization and urban characteristics. The participation of closest people influences intensity, but not binary participation.

OVERALL RESULTS FROM THE THEORETICAL ANALYSIS How the determinants of demand operate in each period. The effect of public intervention on the initial cultural capital stock. A justification for public intervention; demand and transfer. The effectiveness of cultural policies on capital.

OVERALL RESULTS FROM THE EMPIRICAL ANALYSIS The relevance of supply-side variables: constraints. The relevance of cultural and social capital. Suitability of proposed methodology to estimate differentiated behavior.

VARIABLES TEATRO apéndices

RESULTADOS TEATRO apéndices

RESULTADOS TEATRO (CONT) apéndices