Smart endogenous growth: cultural capital and the creative use of skills

Purpose: Despite the growing literature aimed at explaining how cultural and artistic production feeds economic growth, the causal relationships and interplays are not investigated in depth. In the attempt of filling this gap, the purpose of this paper is to examine arts, culture, and education within the framework of the New Growth Theory. Design/methodology/approach: Starting from the analysis of how culture may be at the root of a specific engine of economic growth, the paper presents a theoretical endogenous growth model driven by the combination of the investments in human and cultural capital. Findings: The paper shows that cultural investment has a positive impact on economic growth and on the level of income provided that the economy is sufficiently "culture-intensive", and that this effect is further magnified the more total factor productivity (TFP) is sensitive to the stock of cultural capital. Research limitations/implications: The paper figures out the possibility of a cultural poverty trap as the cause of poor growth performance of some economies in the current post-industrial scenario. Culturally poor economies tend to grow slowly because of the lack of cultural exposure, which makes TFP poor since human capita is weakly inclined to be used in innovative, flexible ways. Originality/value: The paper presents a new endogenous growth model. The paper argues that the available endogenous growth models fail to take into account the full set of relevant factors that make endogenous growth possible, and that the missing entry is cultural capital.