Wednesday, December 12, 2007

The Good News: Arts Groups Are Beginning to Deploy Economic Impact Studies

But depending on who computes the impact, the results can be grossly overvalued for several reasons. First of all, many do not use good methodology or they lump both resident and visitor spending into the impact (economists do not include resident spending as value added to the local economy).

Secondly, these studies generally make two key mistakes. They fail to deduct “leakage,” the word used for spending that immediately ricochets out of the local economy for goods and services purchased elsewhere. It is very unlikely that all supplies are purchased locally.

Equally significant, the studies nearly always assume all related spending was "prompted" by their facilities and events. Many fail to distinguish that much of the spending was generated by visitors who took in the facility or event on trips for other purposes. In other words, they would have been in that town at that time anyway, regardless of that facility or event, so it isn’t truly considered economic impact.

Depending on the type of cultural event, e.g., performing arts, museums, historic sites etc., anywhere from 3.9% to 4.9% of visitors take in the events. But only 5% up to 15% are prompted by the event or facility.

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