Public policy and the performing arts: intended and unintended consequences of public subsidies

The aim of my research is to assess intended and unintended consequences of public subsidies to non-profit institutions, particularly focusing on the performing arts. In recent years, one of the main objectives of public subsidies has been to curb prices, in order to encourage widespread attendance by removing a barrier for groups traditionally excluded from live performances. But do lower prices encourage attendance. Are people who normally do not participate in art events, such as those from disadvantaged socio-economic groups, prevented from doing so by high prices. And do the public subsidies necessary to lower prices have unintended consequences that might work against the objective of broader attendance - for instance, by 'crowding-out' private donations and thereby reducing overall support to performing arts institutions. In my thesis I address these questions using data from the United Kingdom and the United States. In the first empirical component I explore to what extent admission prices influence the demand for live performances of wealthy, middle-class and deprived individuals. In the second part I assess to what extent public subsidies are correlated with attendance analysing the 2002 American Survey of Public Participation in the Arts. While the results of the price elasticity of the demand for performing arts study highlight a significant inverse correlation between attendance and prices, the analysis of the impact of public subsidies on attendance indicates that the former do not significantly influence the latter. Possible unintended consequences of government subsidies might prevent them from achieving their objective. I test the hypothesis that public subsidies displace private donations determining the apparent inconsistency between the findings that prices affect attendance and public subsidies do not. While public subsidies do not appear to be effective in stimulating attendance, results indicate that participation in art education is highly correlated with attendance. In the last part of the thesis I identify possible alternatives policy makers have to the use of public subsidies and concentrate on the provision of art education in public schools