Research and Development in Culture: A Case for Cross Subsidies in the Arts

Christian Jaramillo H. ()

No 5346, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: Several types of arguments advocate state involvement in the promotion of culture. Many of them imply some sort of subsidy, usually to non-for-profit firms; none favors taxing cultural events. The tax literature, on the other side, discusses excise taxation on culture only as a way to redistribute income. However, to the extent that culture is a public good, taxing it is undesirable. Why are then excise taxes on public events extant in many countries? This paper argues that the development of profitable artists is analogous to R&D in the industrial organization literature, and that the excise taxation of public cultural events may be part of an efficient policy to fund it. Using a Stackelberg game to model the investment to develop an artist, I find that the optimal tax is a multiple of the expected surplus created by the artist that cannot be appropriated by the investor who funds her, and that progressivity plays a limited role at most.

Keywords: Excise taxes; cross subsidies; art; culture; public policy; artist development (search for similar items in EconPapers)
JEL-codes: H23 H50 Z11 (search for similar items in EconPapers)
Pages: 24
Date: 2009-02-11
New Economics Papers: this item is included in nep-cul, nep-ino and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:005346

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