Do creative industries generate multiplier effects? Evidence from UK cities 1997-2018

13 July 2021

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​Dr Diana Gutierrez Posada, 

​Dr Diana Gutierrez Posada

Research Fellow at City REDI at the University of Birmingham

Dr Diana Gutierrez Posada became a member of City-...

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Dr Tasos Kitsos, 

Dr Tasos Kitsos

Research Fellow at City REDI at the University of Birmingham

Dr Tasos Kitsos is an economist specialising in re...

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Dr Max Nathan, 

Dr Max Nathan

Associate Professor, Applied Urban Sciences, UCL

Dr Max Nathan is Associate Professor in Applied Ur...

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Dr Massimiliano Nuccio

Dr Massimiliano Nuccio

Assistant Professor, Ca' Foscari University of Venice

The creative industries have received much attention from economic geographers and others, both for their propensity to co-locate in urban settings and their potential to drive urban economic development.

However, evidence on the latter is surprisingly sparse. In this paper we explore the long-term, causal impacts of the creative industries on surrounding urban economies. Adapting Moretti’s local multipliers framework, we build a new 20-year panel of UK cities, using fixed effects and a historic instrument to identify effects on non-creative firms and employment.

We find that each creative job generate at least 1.9 non-tradable jobs between 1998 and 2018: this is associated with creative business services employees’ local spending, rather than visitors to urban amenities such as galleries and museums. We do not find the same effects for workplaces, and find no causal evidence for spillovers from creative activity to other tradable sectors, findings consistent with descriptive evidence on the increasing concentration of creative industries in a small number of cities. Given the small numbers of creative jobs in most cities, however, the overall effect size of the creative multiplier is small, and shapes only a small part of non-tradable urban employment change. Overall, our results suggest creative economy-led policies for cities can have positive – albeit partial – local economic impacts.

This report is being published as part of the PEC’s campaign Creative Places, which is calling for the government to target funding to creative microclusters around the UK.

Photo of Aberystwyth in Wales by Wilhelm Gunkel