This paper draws inference on the effect of changes in indirect taxation on household spending on cinema and performing arts using data from the Spanish household expenditure survey. As of September 2012, value-added tax (VAT) on cinema and performing arts in Spain was raised 13 percent points, with the exception of the Canary Islands which are not part of the Spanish VAT territory. Indirect taxation levied on cinema and performing arts through the General Indirect Tax of Canary Islands (Impuesto General Indirecto de Canarias, IGIC) had changed in July 2012 by only 2 percent points. Such an uneven raise in the tax rates is the source of exogenous variation used for identification in this paper. As the sample of treated households (exposed to the VAT rise) is much larger than the sample of untreated households (exposed to the IGIC rise), we use causal inference methods to estimate the average treatment effect of the VAT rise on the untreated households. We find that the average household expenditure on cinema and performing arts of the untreated households would not have changed significantly, had untreated households been exposed to the VAT rise. However, this average treatment effect would not have been homogeneous, as we identify an average treatment effect conditional on participation of 52.37 euros. Thus, the tax rise would have increased the annual expenditure of those households that spend on cinema and performing arts regularly.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
Item 09421 includes expenditure on attending bullfighting, as in Spain many consider it an art. A law was approved in 2013 for the regulation of bullfighting as cultural heritage (Agencia Estatal Boletín Oficial del Estado 2013). Accordingly, this is now included in the plan of action of the Ministry of Education and Culture and Sports (Ministry of Education and Culture and Sports 2013). Since 2017, the new Classification of Individual Consumption by Purpose ECOICOP replaces the former COICOP classification in Spanish official statistics. The COICOP category 09421 now corresponds to the new ECOICOP category 094210, which contains exactly the same group of services.
For various examples of media coverage, visit the following links: El Pais (07/13/2012), El Pais (08/01/2012) and ABC (07/13/2012).
El Confidencial (05/06/2013).
Unfortunately, the CPI is not available for cinema and performing arts specifically, but for aggregate cultural services, COICOP category 0942, which includes cinema and performing arts (09421), and also museums, libraries, art galleries and exhibitions (09422), historic monuments, national parks, zoological and botanical gardens and aquaria (09423), audio and video equipment rentals and pay per view TV (09424), and photography and private services for parties and pets (09425).
The Organic Law 2/2012, of 27 April, on budgetary stability and financial sustainability introduced changes in the Spanish Constitution and obliged central administration, regional governments, local corporations, and social security administration (Agencia Estatal Boletín Oficial del Estado 2012).
COICOP item 09421 bundles together cinema, performing arts and other shows and does not mention how they are shared out in household expenditure. However, box-office data collected in the Cultural Statistics Yearbook of the Spanish Ministry of Culture indicate that, in 2012, box-office revenue from cinema was 95.57%, while the revenue coming from performing arts (live performances of theater, opera and zarzuela, concerts and dance) was 4.43%. As box-office revenue is the other side of the coin of household expenditure, this proportion should be similar in COICOP item 09421.
As the Canary Islands are a major touristic destination, changes in tourist arrivals could be a concern for our analysis. However, the survey includes households whose household head is a resident, not a tourist. Additionally, most households are interviewed twice in consecutive years. Thus, restricting the analysis to households that participate twice, the sample excludes households which migrate in or out of the country between waves. Therefore, migration changes between waves do not affect our analysis. Notice that had we used data on box-office sales, both tourism and migration would influence the results.
Notice that since 2017, there is a CPI for ECOICOP item 094210 (cinema, theater and concerts), whereas before that date and as shown in Fig. 1 they used to be bundled together with other cultural services into a CPI for cultural services for COICOP category 09421.
Abadie, A. (2005). Semiparametric difference-in-differences estimators. The Review of Economic Studies, 72(1), 1–19.
Abadie, A., Athey, S., Imbens, G. W., & Wooldridge, J. (2017). When should you adjust standard errors for clustering? Working Paper No. w24003. National Bureau of Economic Research.
Abadie, A., & Imbens, G. W. (2006). Large sample properties of matching estimators for average treatment effects. Econometrica, 74(1), 235–267.
Abadie, A., & Imbens, G. W. (2008). On the failure of the bootstrap for matching estimators. Econometrica, 76(6), 1537–1557.
Abadie, A., & Imbens, G. W. (2011). Bias-corrected matching estimators for average treatment effects. Journal of Business & Economic Statistics, 29(1), 1–11.
Agencia Estatal Boletín Oficial del Estado. (2012). Ley Orgánica 12/2012, de 27 de abril, de Estabilidad Presupuestaria y Sostenibilidad Financiera. Boletín Oficial del Estado.
Agencia Estatal Boletín Oficial del Estado (2013). Ley 18/2013, de 12 de noviembre, para la Regulación de la Tauromaquia como Patrimonio Cultural. Boletín Oficial del Estado.
Ahn, N., Jimeno, J. F., & Ugidos, A. (2004). ‘Mondays in the sun:’ Unemployment, time use, and consumption patterns in Spain. In The economics of time use, volume 271 of contributions to economic analysis, pp 237–259. Elsevier.
Angrist, J. D., & Pischke, J.-S. (2009). Mostly harmless econometrics. An empiricist’s companion. Princeton: Princeton University Press.
Berbinau, J., & Waelbroeck, P. (2016). La réponse gradué: un modèle de simulation du cas français. In Y. Nicolas & O. Gergaud (Eds.), Évaluer les politiques publiques de la culture, Questions de culture. Paris: Ministry of Culture and Communication.
Borowiecki, K. J., & Navarrete, T. (2018). Fiscal and economic aspects of book consumption in the European Union. Journal of Cultural Economics, 42(2), 309–339.
Brodaty, T. (2016). Annulation des festivals d’Avignon et d’Aix-en-Provence en 2003: des catastrophes économiques locales? In Y. Nicolas & O. Gergaud (Eds.), Évaluer les politiques publiques de la culture. Paris: Questions de Culture. Ministry of Culture and Communication.
Chetty, R., Looney, A., & Kroft, K. (2009). Salience and taxation: Theory and evidence. American Economic Review, 99(4), 1145–77.
de Vries, J., & de Graaf, P. M. (2008). Is the intergenerational transmission of high cultural activities biased by the retrospective measurement of parental high cultural activities? Social Indicators Research, 85(2), 311–327.
Diniz, S. C., & Machado, A. F. (2011). Analysis of the consumption of artistic-cultural goods and services in Brazil. Journal of Cultural Economics, 35(1), 1–18.
Escardíbul, J.O., & Villarroya, A. (2009). Who buys newspapers in Spain? An analysis of the determinants of the probability to buy newspapers and of the amount spent. International Journal of Consumer Studies, 33(1), 64–71.
European Commission (2017). VAT rates applied in the member states of the European Union, situation at 1st January 2017. https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf.
FAETEDA. (2012). Impacto del aumento del IVA en las artes escénicas en España. Informe realizado por encargo de la Federación de Asociaciones de Empresas de Teatro y Danza (FAETEDA).
FAETEDA. (2013). Impacto real del aumento del IVA en el sector de las artes escénicas en España en los primeros meses de su aplicación. http://www.sgae.es.
Fernandez-Blanco, V., Orea, L., & Prieto-Rodriguez, J. (2009). Analyzing consumers heterogeneity and self-reported tastes: An approach consistent with the consumer’s decision making process. Journal of Economic Psychology, 30(4), 622–633.
Fernandez-Blanco, V., Orea, L., & Prieto-Rodriguez, J. (2013). Endogeneity and measurement errors when estimating demand functions with average prices: An example from the movie market. Empirical Economics, 44(3), 1477–1496.
Gapinski, J. H. (1986). The lively arts as substitutes for the lively arts. The American Economic Review, 76(2), 20–25.
García-Enríquez, J., & Echevarría, C. A. (2018). Demand for culture in Spain and the 2012 VAT rise. Journal of Cultural Economics, 42, 469–506.
Gimenez-Nadal, J. I., & Molina, J. A. (2014). Regional unemployment, gender, and time allocation of the unemployed. Review of Economics of the Household, 12(1), 105–127.
Hallmann, K., Muñiz-Artime, C., Breuer, C., Dallmeyer, S., & Metz, M. (2017). Leisure participation: Modelling the decision to engage in sports and culture. Journal of Cultural Economics, 41(4), 467–487.
Hernán, M. A., & Robins, J. M. (2019). Causal Inference. Boca Raton: Chapman & Hall/CRC, forthcoming.
Katsuura, M. (2012). Lead-lag relationship between household cultural expenditures and business cycles. Journal of Cultural Economics, 36(1), 49–65.
Legoux, R., Carrillat, F., Boeuf, B., & Darveau, J. (2014). A meta-analysis of demand and income elasticity in the performing arts. Presented in ACEI2014 Montreal.
Lévy-Garboua, L., & Montmarquette, C. (1996). A microeconometric study of theatre demand. Journal of Cultural Economics, 20(1), 25–50.
Lévy-Garboua, L., & Montmarquette, C. (2011). Demand. In R. Towse (Ed.), A handbook of cultural economics, 2nd edition. Cheltenham: Edward Elgar Publishing.
Machado, A. F., Golgher, A. B., Diniz, S., & Gama, L. C. D. (2017). Consumption of cultural goods and services and time allocation in Brazil. Nova Economia, 27(1), 35–63.
Ministry of Education and Culture and Sports. (2013). Plan Estratégico Nacional de Fomento y Protección de la Tauromaquia.
Nguyen-Hoang, P., & Yinger, J. (2011). The capitalization of school quality into house values: A review. Journal of Housing Economics, 20(1), 30–48.
Nicolas, Y., & Gergaud, O. (2016). Évaluer les politiques publiques de la culture. Paris: Questions de Culture. Ministry of Culture and Communication.
Observatorio Vasco de la Cultura. (2014). El impacto del IVA en las artes escénicas, la música y el cine.
O’Hagan, J. (2011). Tax concessions. In R. Towse (Ed.), A handbook on cultural economics, 2nd edition. Cheltenham: Edward Elgar.
Peterson, R. A. (1992). Understanding audience segmentation: From elite and mass to omnivore and univore. Poetics, 21(4), 243–258.
Prieto-Rodriguez, J., Romero-Jordán, D., & Sanz-Sanz, J. F. (2005). Is a tax cut on cultural goods consumption actually desirable? A microsimulation analysis applied to Spain. Fiscal Studies, 26(4), 549–575.
Redondo-Bellón, I., Royo-Vela, M., & Aldás-Manzano, J. (2001). A family life cycle model adapted to the Spanish environment. European Journal of Marketing, 35(5/6), 612–638.
Ringstad, V., & Løyland, K. (2011). Performing arts and cinema demand: Some evidence of Linder’s disease. Applied Economics Quarterly, 57(4), 255–284.
Seaman, B. A. (2006). Empirical studies of demand for the performing arts. In V. A. Ginsburg & D. Throsby (Eds.), Handbook of the economics of art and culture (Vol. 1, pp. 415–472). Amsterdam: Elsevier.
Spanish Business Cycle Dating Committee. (2015). CF Index of Economic Activity. http://asesec.org/CFCweb/cf_index_e.htm.
Suarez-Fernandez, S., Perez-Villadoniga, M. J., & Prieto-Rodriguez, J. (2018). Are We (Un)Consciously Driven by First Impressions? Price Declarations vs. Observed Cinema Demand when VAT Increases. In ACEI Working paper series AWP-02-2018, Association for Cultural Economics International.
Thomas, K. (2016). Savoir évaluer des programmes dénseignement artistique: le cas de little kids rock. In Y. Nicolas & O. Gergaud (Eds.), Évaluer les politiques publiques de la culture. Paris: Ministry of Culture and Communication.
Van der Ploeg, F. (2006). The making of cultural policy: A European perspective. In V. A. Ginsburg & D. Throsby (Eds.), Handbook of the economics of art and culture (Vol. 1, pp. 1183–1221). Amsterdam: Elsevier.
Villarroya, A., & Ateca-Amestoy, V. (2015). Spain. Compendium of Cultural Policies and Trends in Europe, 17th edition 2015. Council of Europe/ERICarts. https://www.culturalpolicies.net.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis, 9th edition. Cambridge: Cambridge University Press.
Von Rimscha, M. B. (2013). It’s not the economy, stupid! External effects on the supply and demand of cinema entertainment. Journal of Cultural Economics, 37(4), 433–455.
Zieba, M. (2009). Full-income and price elasticities of demand for German public theatre. Journal of Cultural Economics, 33(2), 85–108.
We thank participants at the 20th International Conference on Cultural Economics held at RMIT University in Melbourne, 26-29 June 2018 for their comments. Financial support from the Basque Government (IT873-13 and IT1336-19), and from the Spanish Ministry of Economy and Competitiveness/FEDER (ECO2015-64467-R) is gratefully acknowledged.
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
About this article
Cite this article
Ateca-Amestoy, V., Gardeazabal, J. & Ugidos, A. On the response of household expenditure on cinema and performing arts to changes in indirect taxation: a natural experiment in Spain. J Cult Econ 44, 213–253 (2020). https://doi.org/10.1007/s10824-019-09357-0
- Policy evaluation
- Natural experiment
- Indirect taxation
- Performing arts
- Household expenditure
- Spanish household budget survey