Perhaps the most prominent historical example of arts as a local economic cluster is Renaissance Florence. The arts in Florence during the Renaissance period served as a hub for painting, sculpture, and architecture. While supported by demand in the local area through endowments and patronage, arts production was a prominent commercial activity. Final demand for finished works of art required a supply chain of raw materials (resins, paints, marble), created a network of supportive occupations and skills through guilds, and was a source of innovation in artistic and architectural styles and techniques. Arts development in Florence illustrates two broad notions:
- It was a hub in a network of complementary industries and occupations, related through supply chain relationships, through similar spheres of influence, and through information sharing (schools, guilds, and workshops).
- While initially wealth creation may have been sparked by international trade and the concentration of financial wealth, the follow-on contribution, the economic impact of the arts cluster, was undeniably the reason for economic growth of Florence.
In his book, The Rise of the Creative Class, Richard Florida called attention to the underlying changes in the occupational composition of work. The economic trends he measured reflected shifts away from production occupations and towards those engaged in creating applications in science, technology, and the arts. Arts clusters of the 21st century reflect this change in local economy.
The classic model of development presumes that capital formation and accumulation results from exports of goods and services, which in turn leads to local income growth and consumption possibilities including consumption of arts. Economic growth is seen then as driven by an exogenous process. However, a few questions arise, “Can the arts become the initial stage of economic development?”, “Is economic growth endogenous?”, “Can growth be driven through the consumption possibilities in the development of the arts?”
Recent work at the Brookings Institution focused specifically on the role that the arts play in economic development. A series of articles published study the links between the development of the arts and arts districts as an engine for economic growth in local communities and the economy as a whole. Substantive empirical results lend themselves to a host of public policies that stimulate the growth in arts in order to stimulate economic growth. Several takeaways can be drawn from a few highlighted studies.
Ann Markusen, Anne Nicodemus, and Elisa Barbour address the issue of endogeneity straight on. In their view, investments in arts activities and innovations expand the consumption possibilities for local communities resulting in local income expansion and ultimately exports. They posit that expanding arts projects and entertainment venues adds economic growth to the extent that local resources are used in production of those arts activities. They found that many ex-urban areas are host to arts organizations and that areas with greater number of arts organizations per capita are located in more thinly populated areas of the state. Essentially, rural communities invest in a full range of artistic activities even though they are smaller in scale. Moreover, in place-based analysis they find that job-centers that have higher-income demographics are more likely to provide arts development in their communities.
Another example includes Jenny Schuetz exploring the links between art galleries and location. Art galleries are different from performing arts in that they are akin to high-end retail stores and are therefore likely to be located in similar neighborhoods; and like retail stores, the objective behind location is to sell art. Using Manhattan as her test site, she explored whether the presence of galleries led to greater economic and physical development (especially sites with distinctive architecture) in a neighborhood. In particular, she asks what location-specific amenities attract galleries and does the subsequent development of gallery clusters lead to greater economic and real estate development in the surrounding area? It appears that in the case of galleries, there were somewhat mixed results with respect to follow-on economic development. Galleries are attracted to locations with place-specific, physical amenities (e.g., older building stock, historic districts) and where there are already other galleries. A common thread is that the relationship between gallery location and neighborhood character is important in the development of a gallery cluster.
In another paper, Cultural Enterprise Formation and Cultural Participation in America’s Counties, Roland Kushner notes the relationship between arts and the community. He uses the case of the Bach Choir of Bethlehem, Pennsylvania as an illustration of how entrepreneurial initiatives, with the support of the community, can revive and enrich the local cultural environment and the local economy through innovation and collaborative activity. This model is repeated in many locations and his paper continues with an econometric study across 281 U.S. counties that estimates a quantitative link between community support and arts development. 
Choosing an Arts Location in Philadelphia
In her senior Capstone paper, Emma Girandola, a recent Temple graduate double-majoring in Performing Arts and Economics, took a slightly different but related approach to analyzing the relationship between arts and quality of life. She formed her own performing arts company that provides customized, performance services to clients through a variety of complementary services including artistic (music and scripts) composition, choreography, set design, graphics, and education. Her company, Valerius Productions, is like the workshops of Florence and the workspaces of today’s software development companies – an amalgam of creative occupations and skills tied together in a collaborative model. Her specific research question was to identify the best locations in Philadelphia for her business and studio.
She first reported some interesting insights on location choice through three cases that reflected the experiences of other artistic ventures: (1) The Rock School for Dance Education, (2) The Philadelphia Dance Academy, and (3) thefidget space. These three cases were similar to the Bach Choir in that there were several common ingredients. First, the entrepreneurial initiative of the artist and the supportive relationship shared with the local community. Second, the attraction of the studio to a vibrant location having amenities was also important.
Emma took a quantitative approach by modeling arts location directly related to the local environment and quality of life in the area. Environmental factors are difficult to measure: things like “buzz” and “trendy” are always elusive to quantify, but she got at these factors through some proxies. In particular, Emma calculated the location quotient (LQ) for arts industries by zip code in Philadelphia County from 2006. This is a straightforward measure of the concentration of existing arts entities in a zip code relative to the aggregate number in Philadelphia. She then modeled the growth in the LQ as a function of restaurant employment density, the number of small businesses (up to 50 employees), and a time-specific indicator. Parsimonious, yes, but the equations yielded a set of locations that were most likely to be successful in locating and growing an arts enterprise. The list of projected high-prospect locations included was quite reasonable.
If you consider a cluster to be a hub in a network of complementary activities that attract related skills and occupations, as well as capital and resources, then the arts are one such cluster. Arts communities attract related skills and flourish in a supportive community with sufficient financial resources, and in turn, can drive local economic growth. This was the case in Renaissance Florence, the Bach Choir of Bethlehem, Pennsylvania, and it can be the case in many communities seeking economic development and growth.
For many suburban and exurban communities developing an arts cluster and a complementary environment of restaurants, small innovative businesses, and supportive communities including educational institutions, can be part of a blueprint for economic growth and a greater quality of life.
What Emma’s paper suggests is that even in a major urban arts center, specific locations are more conducive to arts development when considered in confluence with architectural amenities, the presence of innovative small businesses, a vibrant restaurant and social scene, and a supportive local community.
Christopher Swann is a senior advisor at ESI. He is an economist, currently engaged in applied economic research and private consulting. Mr. Swann was recently appointed to the post of Assistant Professor of Economics at Temple University.
 Kushner, Roland J., “Cultural Enterprise Formation and Cultural Participation in America’s Counties, in Creative Communities, Art Works in Economic Development, Brookings Institution Press, (2013).
 Girandola, Emma V., “Location is Key: Valerius Productions,” unpublished, Temple University, (2019).