The Economic Value of Cultural Institutions - a benefit transfer study

Lead Research Organisation: Nesta
Department Name: Policy and Research

Abstract

Measuring the economic value of cultural sites and institutions poses challenges. Traditional economic impact studies have tended to value the market benefits of culture, such as the impacts on employment and gross value added. This ignores the important contribution that culture and cultural institutions play in people's lives. This value is harder to assess as market prices will not exist where cultural institutions/places are free to use or access. However an understanding of this is required for policy evaluation and investment decisions, and not valuing these benefits risks that the activities which generate them are under-appreciated.

To further the evidence base in this area, the research is estimating the value of culture at four historic towns/cities and for four cultural institutions located within them (cathedrals or regional art galleries, for example). It will quantify in monetary terms the use values (the values that those who directly use the site put on being able to use them) and non-use values (including the value that non-users place on the sites' existence). The valuation estimates will be obtained using a methodology that meets the criteria required by the UK Government in its evaluation guidance and so will contribute to the evidence base for public investment in culture. The data used in the study will be collected through an online survey.

Valuations will be estimated using a contingent valuation methodology, where those surveyed are asked to consider their valuation of the site/institution in the context of a hypothetical scenario that makes them meaningfully consider their valuation in monetary terms. For example, how much they might be prepared to pay to prevent the scenario of damage to a site. The research will also examine the capacity for benefits transfer (i.e. the extent to which values from particular sites can be robustly applied to value other sites), allowing the findings from the study to be potentially applied to other cultural sites. This will be assessed by analysing whether the values estimated are comparable within the sites in the analysis.

Planned Impact

The research will estimate financial measures of the value that four places and four cultural sites located within them provide for users and non-users. These estimates will be of direct benefit for the sites/institutions in demonstrating the value of their cultural contributions. The sites selected for analysis will be chosen so that they are comparable in terms of size/situation. The research will also test the robustness of the valuation estimates across sites by analysing how they compare between the sites/places analysed. If the results are comparable across sites, this will, under some assumptions, enable the findings to be applied at sites similar to those in the study.

The research will therefore have a positive impact in that the cultural sector may draw on robust valuation estimates without incurring the costs of further primary data collection at their sites. As the research methodology is consistent with Government guidance on evaluation, it will be possible for civil servants and institutions to use the findings in cost-benefit analysis. The research is therefore of direct policy relevance for Government and the cultural and heritage sectors.
 
Description This study generated willingness to pay (WTP) estimates from users and non-users for four historic cities and four iconic heritage sites (cathedrals) within a nested design. Users (residents and visitors) and non-users were asked to consider a hypothetical scenario of increased damage to heritage capital from climate change and asked their willingness to pay a one-off donation to an independent fund to undertake maintenance and preventative measures.

The research has proven to be of interest to both government and the arts and heritage sector: in the former case, the Department of Digital, Culture, Media and Sport (DCMS) is making use of the estimates and those from a DCMS-funded parallel study of regional museums in preparing business cases. In the latter case, sector funders are commissioning the researchers to undertake further research, including work to develop the capacity of cultural institutions to make use of the value estimates. Of particular interest has been our use of 'Benefit Transfer' methods in which WTP values can be applied to comparable sites without the need for additional costly primary data collection.

We used contingent valuation methods to estimate values for four historic cities and their four cathedrals, using the survey procedures developed in our earlier research and applied in a recent EU-wide benefit transfer study. Contingent valuation is recognised by HM Treasury as an accepted method for estimating the value of use and non-use value of goods and services. In this approach, people who use a good/asset or service (in this study historic cityscapes and cathedrals) and those who have not used them are asked their willingness to pay to maintain them.

WTP estimates were obtained from individuals who had visited (or lived), or not visited, one of four historic cities: Canterbury, York, Winchester and Lincoln, and their cathedrals. These sites were selected on the basis that they are historic cities with cathedrals that receive significant numbers of visitors and are broadly comparable in terms of size.

To assess transferability, we performed a battery of simple unit transfer, adjusted (income) transfer, and function transfer tests between sites.
We confirmed the findings in our earlier research for the AHRC's Cultural Value Project that contingent valuation delivers plausible estimates of use and non-use value in culture, whereby the WTP values vary with observed individual socio-demographic (and other) characteristics in a way that is consistent with economic theory. We also succeeded in demonstrating that, as in our parallel regional museums study, it is possible to transfer valuation estimates for use and non-use values between sites. In particular, for the four historic cities and their associated cathedrals in our study, the average 'transfer error' we found was substantially lower than the threshold for validity suggested in the literature for acceptable value transfer.

For the transfer of use and non-use values, we found that the transfer errors between sites were minimised by using the average valuations of multiple sites to proxy the value of another site. Although low transfer errors were obtained, the robustness of this type of transfer to new sites does depend on such sites being similar to those studied here. Surprisingly, adjusting the value transfer further by controlling for income or other variables using regression analysis was not found to improve performance, indeed in some cases the valuation transfer errors were increased.
Exploitation Route The research provides a bank of use and non-use values for historic towns and cathedrals for transfer to other urban heritage sites in the UK, for use by local residents, NGOs and government to build the evidence base to inform local planning decisions.

As a result of this project there have been follow up pieces of analysis commissioned by Arts Council England (ACE) to value a series of cultural sites (galleries, theatres, local museums and digital cultural offers) and by Historic England on the value of public buildings and historic streets. Building on this work, and the work of the project, the Department for Digital, Culture, Media and Sport (DCMS) have in January 2021 published a framework on how they will use estimates of value in the cultural and heritage sector, and guidance is being produced by ACE to help different kinds of cultural institution determine their value using the research's methodology. See the links below for further details:
https://www.gov.uk/government/publications/valuing-culture-and-heritage-capital-a-framework-towards-decision-making/valuing-culture-and-heritage-capital-a-framework-towards-informing-decision-making
https://www.artscouncil.org.uk/sites/default/files/download-file/Guidance%20Note%20-%20How%20to%20estimate%20the%20public%20benefit%20of%20your%20Museum%20using%20the%20Economic%20Values%20Database_0.pdf
Sectors Creative Economy

Leisure Activities

including Sports

Recreation and Tourism

Culture

Heritage

Museums and Collections

URL https://www.nesta.org.uk/report/economic-value-heritage/
 
Description This research is a key component of the growing evidence base that makes up the DCMS's Culture and Heritage Capital Framework, a Spending Review-backed government initiative to place public investment in culture and heritage on the same rigorous footing as public investment in areas like transport and the natural environment.
Sector Communities and Social Services/Policy,Creative Economy,Culture, Heritage, Museums and Collections
Impact Types Cultural

Economic

Policy & public services

 
Description Arts Council England: guidance to help different kinds of cultural institution determine their value using the research's methodology
Geographic Reach National 
Policy Influence Type Influenced training of practitioners or researchers
URL https://www.artscouncil.org.uk/sites/default/files/download-file/Guidance%20Note%20-%20How%20to%20es...
 
Description Arts Council England: guidance to help different kinds of cultural institution determine their value using the research's methodology: local museums
Geographic Reach National 
Policy Influence Type Influenced training of practitioners or researchers
URL https://www.artscouncil.org.uk/sites/default/files/download-file/ACE%20Local%20Museums%20Guidance%20...
 
Description Arts Council England: guidance to help different kinds of cultural institution determine their value using the research's methodology: regional art galleries
Geographic Reach National 
Policy Influence Type Influenced training of practitioners or researchers
URL https://www.artscouncil.org.uk/sites/default/files/download-file/ACE%20Guidance%20Note%20for%20Galle...
 
Description Arts Council England: guidance to help different kinds of cultural institution determine their value using the research's methodology: regional theatres
Geographic Reach National 
Policy Influence Type Influenced training of practitioners or researchers
URL https://www.artscouncil.org.uk/sites/default/files/download-file/ACE%20Guidance%20Note%20for%20Theat...
 
Description DCMS framework on how they will use estimates of value in the cultural and heritage sector
Geographic Reach National 
Policy Influence Type Influenced training of practitioners or researchers
URL https://www.gov.uk/government/publications/valuing-culture-and-heritage-capital-a-framework-towards-...
 
Description Guidance document for regional museums included in government guidance for applicants to Towns Fund
Geographic Reach National 
Policy Influence Type Contribution to new or Improved professional practice
URL https://static1.squarespace.com/static/5ef3391483c1fe1e25c1e871/t/6167ea941158d95a235a8024/163420021...
 
Description PEC Researchers present to DCMS specialists on international policy
Geographic Reach National 
Policy Influence Type Contribution to a national consultation/review
 
Description Economic value of culture
Amount £297,350 (GBP)
Organisation Arts Council England 
Sector Public
Country United Kingdom
Start  
 
Description Presentation at DCMS Cultural and Heritage Capital Conference 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact Presented research findings and created guidance documents for sector participants on how to use the economic valuation techniques developed in the research at their own cultural or heritage organisations.
Year(s) Of Engagement Activity 2022
 
Description Presentation to IROC Network 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Industry/Business
Results and Impact A presentation by Hasan Bakhshi showcasing the research on economic value of culture and heritage as an impact case study to the IROC network of Independent Research Organisations in the cultural and heritage area.
Year(s) Of Engagement Activity 2021