Economic Impacts of Cultural Events on Local Economies: An Input—Output Analysis of the Kaustinen Folk Music Festival

Abstract

This paper examines the economic impacts of Finland's Kaustinen Folk Music Festival. The impacts are calculated on output, demand and wages, employment and on national and regional taxes. The results indicate, first, that the effects of the festival on output are about ₠1.7 million. Kaustinen can also be seen as a good investment for the local municipality, as regional tax revenues increased by about ₠65,600 in the year studied, while the annual subsidy was ₠40,365. From the perspective of the Keski-Pohjanmaa region as a whole, the Kaustinen Folk Music Festival has a substantial impact on regional incomes through subsidies (about one-fifth of the costs of the festival is offset by subsidies from the Arts Council of Finland (Ilmonen et al, 1995) and the direct and indirect effects of consumption by festival visitors in different economic sectors. The impact on employment in the region is low (27 employees). The mobilization of voluntary labour, not measured in this study, is, however, considerable. Although the input–output method is laborious and statistically complex, it is very suitable for measuring the impact of tourism or cultural events on local economies. The method provides results that can be used in framing regional policy.