'Phantom of the Opera' or 'Sex and the City'? – Historical Amenities as Sources of Exogenous Variation

25 Pages Posted: 30 Jul 2014

See all articles by Thomas K. Bauer

Thomas K. Bauer

Rhine-Westphalia Institute for Economic Research (RWI-Essen); University of Bochum - Faculty of Economics; IZA Institute of Labor Economics

Philipp Breidenbach

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen); Ruhr-Universität Bochum (RUB); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

Date Written: July 29, 2014

Abstract

Using the location of baroque opera houses as a natural experiment, Falck et al. (2011) claim to document a positive causal effect of the supply of cultural goods on today’s regional distribution of talents. This paper raises serious doubts on the validity of the identification strategy underlying these estimates, though. While we are able to replicate the original results, we proceed to show that the same empirical strategy also assigns positive causal effects to the location of historical brothels and breweries. These estimated effects are similar in size and significance to those of historical opera houses. We document that all these estimates reflect the importance of institutions for long-run economic growth, and that the effect of historical amenities on the contemporary local share of high skilled workers disappears upon controlling for regions’ historical importance.

Keywords: human capital; historical amenities; regional competiveness

JEL Classification: R11, H42, J24

Suggested Citation

Bauer, Thomas K. and Breidenbach, Philipp and Schmidt, Christoph M., 'Phantom of the Opera' or 'Sex and the City'? – Historical Amenities as Sources of Exogenous Variation (July 29, 2014). Ruhr Economic Paper No. 493, Available at SSRN: https://ssrn.com/abstract=2473568 or http://dx.doi.org/10.2139/ssrn.2473568

Thomas K. Bauer

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

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Philipp Breidenbach (Contact Author)

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

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Essen, 45128
Germany

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen) ( email )

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