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Cultural Policies and Fiscal Federalism

PFM, Vol. 4 No. 1, (2004)

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 timeseries
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.

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