Looking for determinants of willingness-to-pay for Sibelius Hall, Lahti

This is an electronic reprint of the original article. This reprint may differ from the original in pagination and typographic detail. Author(s): Title: Year: Version: Please cite the original version: All material supplied via JYX is protected by copyright and other intellectual property rights, and duplication or sale of all or part of any of the repository collections is not permitted, except that material may be duplicated by you for your research use or educational purposes in electronic or print form. You must obtain permission for any other use. Electronic or print copies may not be offered, whether for sale or otherwise to anyone who is not an authorised user. Looking for determinants of willingness-to-pay for Sibelius Hall, Lahti Tohmo, Timo Tohmo, T. (2017). Looking for determinants of willingness-to-pay for Sibelius Hall, Lahti. Cogent Arts and Humanities, 2017(4), Article 1296343. https://doi.org/10.1080/23311983.2017.1296343 2017 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 CULTURE, MEDIA & FILM | RESEARCH ARTICLE Looking for determinants of willingness-to-pay for Sibelius Hall, Lahti Timo Tohmo 1 * Abstract:The aim of this paper is to determine the factors affecting the willingnessto-pay for a local concert hall, namely Sibelius Hall in Lahti. Our study argues that a high income, the use of cultural services and a positive attitude towards culture were connected to a high willingness-to-pay for Sibelius Hall. Our study revealed that “I do not know” answers can be partly explained by the character of cultural preferences being an acquired taste. As a consequence, the users and respondents exhibiting a positive attitude towards culture may choose the “I do not know” option instead of making a zero bid. Subjects: Art & Visual Culture; Popular Music; Music & The Arts Keywords: factors of willingness-to-pay; DC-method; the Sibelius Hall; concert hall 1. Background and purpose of the study Mourato and Mazzanti (2002) state that the way institutions and services are organised and provided as well as how resources are allocated affect the well-being of the people (and city residents). Thus, it affects their attitudes towards culture, too. For example, the positive impact of cultural goods has become one of the most important arguments for public support of culture. In our study, we estimate the willingness-to-pay for a specific cultural asset, namely Sibelius Hall in Lahti. The purpose of this study was to measure the factors affecting the willingness-to-pay to maintain the Sibelius Hall concert and congress centre by the residents of Lahti through discrete choice method. Our aim is to clarify the willingness-to-pay to maintain the Sibelius Hall by persons 18 years of age and older who reside in Lahti and the factors that affect this willingness in the light of the NOAA *Corresponding author: Timo Tohmo, School of Business and Economics, University of Jyvaskyla, P.O. BOX 35, Fin40014 University of Jyväskyla, Finland E-mail: [email protected] Reviewing editor: Lincoln Geraghty, University of Portsmouth, UK Additional information is available at the end of the article ABOUT THE AUTHOR Timo Tohmo is an assistant professor in Economics at the School of Business and Economics, University of Jyvaskyla, JSBE, Finland. His research includes regional Economics, Cultural Economics, Tourism Economics and the Economic Impact Studies. PUBLIC INTEREST STATEMENT Generally, the research on arts and culture puts a lot of resources on studies where public support to arts and culture is legitimated. Furthermore, positive impact of cultural goods has become one of the most important arguments for public support of arts and culture. These externalities have, however, only seldom been measured by empirical studies, by the CV method. In our study, we estimate the willingness-to-pay for a specific cultural asset, namely Sibelius Hall in Lahti. The purpose of this study is to clarify the economic value and measure the factors affecting the willingness-to-pay to maintain the Sibelius Hall concert and congress centre. In order to find out the value of the Sibelius Hall to the inhabitants of Lahti (Finland), they are asked how willing they are to pay to keep the music hall in existence and analysed with a CV method. Received: 14 December 2016 Accepted: 03 February 2017 Published: 03 March 2017 Page 1 of 14 © 2017 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. Page 2 of 14 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 Panel (Arrow et al., 1993) guidelines1 for applications of the contingent valuation method. These guidelines for CV2 surveys concern, among other things, the design of the study and the format used to elicit willingness-to-pay. Lahti residents were asked how much were they willing to pay in taxes (for increased municipal spending) to keep Sibelius Hall in existence. The contingent valuation method (CV method) was first proposed by Ciriacy-Wantrup (1947), and the essentials of the CV-method have been discussed in Cummings, Brookshire, and Schulze (1986) and Mitchell and Carson (1989). A major issue in the development of CV is that until the mid-1980s, most CV surveys used some version of an open-ended question (Hanemann, 1994). However, in markets, similar to voting, people face discrete choices: “This good costs 10 €; do you want to buy it?” Bishop and Heberlein (1979) were the first to use this binary choice technique.3 The CV method has been applied, for the most part, to the valuation of environmental goods and only occasionally to cultural goods. The bibliography by Carson, Wright, Carson, Alberini, and Flores (1994) lists 1,600 studies worldwide on topics such as the environment, health and arts. The bibliography by Noonan (2002) lists only 53 CV studies on the arts and culture. Culture-related CV studies include, e.g. Throsby and Withers (1983), Morrison and Westi (1986), Bille Hansen (1996, 1997), Martin (1994), Mazzanti (2001), and Frey and Pommerehne (1989). The main purpose of the present study is to identify the factors that promote the willingness-to-pay for a local concert hall, Sibelius Hall in Lahti. We have not found any other CV studies that address concerts or concert halls. We restrict the survey to Lahti taxpayers aged 18 years old or older, even though Finnish citizens other than the residents of Lahti and foreign tourists or other foreigners may be willing to pay for the maintenance of Sibelius Hall. However, they do not pay their taxes to Lahti, and local funding is a very significant source of income for Sibelius Hall. 2. The Sibelius Hall concert and congress centre The Sibelius Hall concert and congress centre opened to the public in 2000. The Sibelius Hall has acted as home to the Symphony Lahti since 2000 (http://www.sinfonialahti.fi/orkesteri/). Sibelius Hall (http://www.sibeliustalo.fi/en) is owned by the City of Lahti. Sibelius Hall hosts classical and other music concerts. Airamo (2008) argues that the building of Sibelius Hall costs 123 million Finnish marks, which was equivalent to 26.65 million euros. The turnover of Sibelius Hall in 2006 was 1.96 million euros. As an incremental revenue, Sibelius Hall received approximately 790 000 € from the budget of the community for the concert hall’s expenses (rents) in 2006 (on average, yearly rent support is 575,115 €/year). The revenue of Sibelius Hall comes from its entertainment music concerts (40%), its meetings and congresses (30%), the rents of the Symphony Lahti (26%) and restaurants (12%). At the time the inquiry was made, Sibelius Hall had approximately 20 regular employees (Uusi Lahti, 2008). In 2007, 119 concerts (51 by Lahti Symphony Orchestra) were held in Sibelius Hall. The number of visitors to the concerts has been around 100,000 yearly.4 In April 2008, we sent a postal inquiry to randomly selected 18-year-old Lahti residents. Our survey contained questions concerning the residents’ attitudes towards Sibelius Hall and culture in general. We also asked about the respondents’ backgrounds, e.g. age, income, education, etc. When the sampling was finished, there were approximately 76,518 18-year-old Lahti residents surveyed in total. The dichotomous choice scenario included yearly paid taxes to the municipality. Different sets of proposed sums of extra taxes (from 2 to 28 €) were sent to the residents. As a consequence, we sent 100 questionnaires to each of the 18-year-old Lahti residents in each of the groups with the different proposed willingness-to-pay values. The response rates for 2, 4, 6, 7.5, 9 11, 13, 18, 23 and 28 € proposed bids were 45, 43, 38, 44, 32, 41, 36, 41, 45 and 38%, respectively, which can be considered a good result for mail inquiries. In Spring 2008, when the surveys were collected, the concerts of the Symphony Lahti (http://www.sinfonialahti.fi/ajankohtaista/fi_FI/sinfonisesti_lentolehtinen/) held in Sibelius Hall were by Beethoven (Coriolan-overture and Egmont), Richard Strauss (Macbeth) and Shostakovich (Hamlet). Page 3 of 14 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 3. Results 3.1. Variables used in the multinomial logit models We employ a multinomial logit model to analyse the factors of willingness-to-pay for Sibelius Hall. The dependent variable in the analysis has three outcomes for a question of willingness-to-pay: Are you willing to pay X euros in taxes for the maintenance of Sibelius Hall? (1) No, (2) Yes, (3) I do not know. The independent variables considered in our study are presented in Table 1. The variables and their expected effects are described in brief below. Our data consist of variables characterising Lahti citizens as well as their habits in consuming cultural goods and their attitudes towards culture. Gender is a very common variable in cultural studies, and it is often found that gender consistently explains willingness-to-pay for cultural goods. Bille Hansen (1996) found that women have a higher willingness-to-pay for the Royal Theatre in Copenhagen than men. This is probably because women typically use cultural services more often, which in turn may influence their motivation for paying for cultural use and willingness-to-pay to maintain cultural goods. Age is supposed to act as an explanatory variable for willingness-to-pay for cultural goods. Kirchberg (1996) found that 30–45 year olds are typical users of natural history and science museums. One explanation for audiences of, for example, performing arts being older is that preferences for culture are acquired tastes (see Bille & Schulze, 2006; Stigler & Becker, 1977), e.g. the consumption cultural capital is built over time. Older people are thought to have more often acquired cultural tastes, and as a consequence, age is believed to affect the willingness-to-pay for maintaining Sibelius Hall. The variables characterising households include their size and income. Kirchberg (1996) argues that in Germany, visitors of natural history and science museums more frequently come from households with many people. Bille Hansen (1996) found high income to promote high willingness-to-pay for a cultural good, namely the Royal Theatre. Additionally, Last (2010) found that higher income in Lueneburg, Germany correlates positively with high willingness-to-pay for the cultural supply of the municipality of Lueneburg. Thus, income and household size are expected to be connected with the willingness-to-pay to maintain the Sibelius Hall. Education levels are generally linked with greater use of cultural services. Bille and Schulze (2006) state that highly educated visitors are overrepresented in performing arts audiences. Moreover, Mourato and Mazzanti (2002) argue that the connection between education, income and cultural benefits has been found in cultural valuation studies. This has been interpreted to mean that the value of cultural heritage conservation grows as education rises. Thus, the connection between education and income may, in general, promote a positive willingness-to-pay for cultural goods and services. As a consequence, education is expected to affect the willingness-to-pay for Sibelius Hall. The use of cultural services (or goods) is expected to promote willingness-to-pay to maintain Sibelius Hall. Bille Hansen (1996) argues that attending or participating in many cultural activities increases willingness-to-pay to keep the Royal Theatre in existence. This can be partly explained with the essence of the preferences for culture being an acquired taste. As a consequence, the use of cultural goods is expected to affect the willingness-to-pay for Sibelius Hall. Sibelius Hall does benefit Lahti city, neighbouring towns and the provincial economy and is one of the explanatory variables related to the cultural attitudes of the respondents. We expect responses to be divided, with residents who have experienced Sibelius Hall to think it has a positive impact on the regional economy and development. On the contrary, a share of residents might be of the opinion that Sibelius Hall does not influence the local economy positively by, for example, attracting investment and migrants. Page 4 of 14 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 Table 1. Descriptive statistics, whole sample, variable definitions (control group in brackets) Variable Effective WTP 6–9€ Low WTP 2–4€ High WTP 11–28€ Mean Mean Mean Yes Gender 0.52 0.53 0.63 Age (below 40 years old) 0.30 0.33 0.22 40–59 years old 0.43 0.39 0.33 60 years old or older 0.28 0.29 0.46 Household size (couples and families with children) Single 0.27 0.21 0.26 Couples 0.45 0.54 0.45 Families with children 0.28 0.25 0.29 Education (lower than secondary education level) 0.21 0.25 0.28 Secondary education level 0.39 0.20 0.26 Higher education 0.39 0.55 0.46 Income (low income level, below 20,000 €/year) 0.29 0.33 0.32 High income (over 30,000 €/year) 0.31 0.44 0.46 Average income level (20,000– 29,000 €/year) 0.41 0.23 0.22 Old-fashioned boring place factor 0.30 0.13 0.24 Cultural and social factor 0.34 0.36 0.34 Reluctance factor −0.32 −0.28 −0.55 Image factor 0.49 0.24 0.52 Sibelius Hall will benefit the economies of Lahti, neighbouring towns and the province (no benefit) 0.03 0.08 0.16 High benefit 0.55 0.48 0.58 Average benefit 0.26 0.20 0.14 Low benefit 0.16 0.24 0.12 Use of cultural services No visits during the past year 0.18 0.10 0.10 1–4 visits 0.31 0.44 0.30 5–9 visits 0.27 0.24 0.22 10 visits or more 0.24 0.22 0.38 I do not know Gender 0.88 0.59 0.78 Age (below 40 years old) 0.40 0.24 0.11 40–59 years old 0.07 0.18 0.36 60 years old or older 0.53 0.59 0.53 Household size (couples and families with children) Single 0.36 0.24 0.29 Couples 0.36 0.71 0.50 Families with children 0.29 0.06 0.21 Education (lower than secondary education level) 0.50 0.24 0.36 (Continued) Page 5 of 14 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 We also create four factors that might promote the willingness-to-pay to maintain Sibelius Hall through taxation. To analyse respondent’s preferences and intentions, we formed the following factors. The Image-factor included claims that characterised attitudes towards Sibelius Hall’s image effects. High loadings were found in claims such as the following: Sibelius Hall increases housing cosiness in Lahti; Sibelius Hall increases the attractiveness of Lahti as a business location; Sibelius Hall improves Lahti awareness internationally; Sibelius Hall improves Finland’s image abroad; Sibelius Hall strengthens the identities of Lahti residents as members of the municipality; Sibelius Hall makes Lahti a more attractive place to live; Sibelius Hall is the workhorse of the economy of Lahti; Sibelius Hall is the pride of Lahti; Sibelius Hall is the main concert hall in Finland; and Sibelius Hall and its surroundings have become Lahti’s “living room”. Variable Effective WTP 6–9€ Low WTP 2–4€ High WTP 11–28€ Mean Mean Mean Secondary education level 0.19 0.53 0.33 Higher education 0.31 0.24 0.31 Income (low income level, below 20,000 €/year) 0.87 0.73 0.39 High income (over 30,000 €/year) 0.07 0.13 0.15 Average income level (20,000– 29,000 €/year) 0.07 0.13 0.45 Old-fashioned boring place factor −0.19 −0.15 0.17 Cultural and social factor −0.03 −0.14 0.32 Reluctance factor −0.00 0.13 −0.18 Image factor −0.04 −0.09 0.45 Sibelius Hall will benefit the economies of Lahti, neighbouring towns and the province (no benefit) 0.24 0.28 0.10 High benefit 0.35 0.17 0.28 Average benefit 0.18 0.28 0.33 Low benefit 0.24 0.28 0.28 Use of cultural services No visits during the past year 0.41 0.22 0.21 1–4 visits 0.29 0.33 0.46 5–9 visits 0.12 0.28 0.23 10 visits or more 0.18 0.17 0.10 Table 1. (Continued) Figure 1. Distribution of users and non-users willingness-topay bids. Page 6 of 14 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 Table 2. Effective willingness-to-pay (6, 7.5, 9€); multinomial logit model, coefficients, t-values, relative risk ratios (rrr), base outcome is effective WTP=no Variable, effective WTP (6; 7.5; 9€) Coefficient t-statistic rrr Yes Gender −1.202 −1.08 −0.300 Age (below 40 years old) 40–59 years old −1.531 −1.23 0.216 60 years old or older −1.261 −0.95 0.283 Household size (couples and families with children) Single −1.143 −1.07 0.319 Education (lower than secondary education level) Secondary education level −1.730 −1.16 0.177 Higher education −1.718 −1.01 0.179 Income (low income level, below 20,000 €/year) High income (over 30,000 €/year) 0.759 0.50 2.135 Average income level (20,000–29,000 €/year) 1.570 1.36 4.808 Old-fashioned boring place factor −0.286 −0.38 0.751 Cultural and social factor 0.047 0.06 1.048 Reluctance factor −0.929 −1.23 0.395 Image factor 3.065** 2.68 21.439 Sibelius Hall will benefit the economies of Lahti, neighbouring towns and the province (no benefit) High benefit 0.238 0.14 1.269 Average benefit −0.144 −0.09 0.866 Low benefit 1.442 0.82 4.230 Use of cultural services (5 or more visits) No visits during the year −0.650 −0.38 0.522 1–4 visits −1.407 −1.15 0.245 Constant 4..156* 1.74 I do not know Gender 3.087 0.88 21.912 Age (below 40 years old) 40–59 years old −22.853* −1.92 0.00000000012 60 years old or older −12.719 −0.94 0.00000299 Household size (couples and families with children) Single −1.174 −0.67 0.309 Education (lower than secondary education level) Secondary education level −9.299 −0.72 0.00009 Higher education 3.964 0.31 52.673 Income (low income level, below 20,000 €/year) High income (over 30,000 €/year) −16.404* −1.75 0.000000075 Average income level (20,000–29,000 €/year) −3.525 −1.24 0.029 Old-fashioned boring place factor −9.889* −1.78 0.00005 Cultural and social factor −5.987 −1.55 0.0025 Reluctance factor −6.737 −1.54 0.0012 Image factor 7.557* 1.90 1913.99 (Continued) Page 7 of 14 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 Lahti residents may have objected to the building of Sibelius Hall in the first place. Our second dimension, the reluctance-factor, emphasises that Sibelius Hall was a bad decision and its focus on placement “for better people”. Likert claims with high loadings included the following: The building of Sibelius Hall cost too much; The funds used for Sibelius Hall construction should have been used for some other purposes; The building of Sibelius Hall was right; Sibelius Hall is intended “for better people”; and Sibelius Hall is worthless other than for culture-oriented visitors. “Sibelius Hall offers a wide range of cultural experiences and may act as a place for spending time with one’s family or friends” loaded strongly to one-factor dimension. This dimension is called the cultural and social-factor; it describes the cultural and social dimension of the Music Hall. Finally, we created a factor describing the music hall as an old-fashioned and boring place. This included claims such as the following: The services provided by Sibelius Hall are old-fashioned for modern-day visitors and Sibelius Hall is mostly a boring place. These claims loaded strongly negatively on this dimension. Additionally, the claim “Sibelius Hall interferes with the services of the nearby municipalities” loaded on this factor. 4. Factors affecting the willingness-to-pay to maintain Sibelius Hall Approximately 18% (n = 73) of the respondents had never visited Sibelius Hall. However, four-fifths had visited Sibelius Hall, of which over one fourth had visited the music hall 10 times or more. As expected, users are more willing to pay for the maintenance of Sibelius Hall, and the number of “yes” statements for users was much greater (Figure 1) for all willingness-to-pay proposals than for nonusers. Bille Hansen (1997) also found users to have a considerably larger willingness-to-pay for the Royal Theatre than non-users. However, she found that the willingness-to-pay of non-users accounted for approximately 82% of the total willingness-to-pay for the Royal Theatre. Moreover, Andersson, Armbrecht, and Lundberg (2012) found that in the music festival WOW (three days festival in Gothenburg), with approximately 32,000 visitors, users accounted for approximately 70% of the total value of the festival (measured with contingent value method) and non-users’ represented the remaining 30%. In Germany, Last (2010) found a significant impact of non-users on willingnessto-pay for Lueneburg municipal cultural goods. In our study, we use a multinomial logit model to analyse the factors that may promote the willingness-to-pay to maintain Sibelius Hall. The idea of a multinomial logit model is to determine how independent factors affect the probability of different outcomes. Relative risk ratios express the probability of the present option for certain respondents (persons who meet the condition under consideration) compared to similar persons who do not fulfil the condition (Greene, 1997). Variable, effective WTP (6; 7.5; 9€) Coefficient t-statistic rrr Sibelius Hall will benefit the economies of Lahti, neighbouring towns and the province (no benefit) High benefit 2.356 0.66 10.544 Average benefit 5.079 1.22 160.667 Low benefit −6.944 −1.26 0.00096 Use of cultural services (5 or more visits) No visits during the year 7.394 1.29 1625.99 1–4 visits 2.906 1.05 18.287 Constant 0.386 0.03 Table 2. (Continued) Notes: N=85; LR χ2(34)= 89.05; Log likelihood=−33.279804; Prob. χ2=0.0000, R2=0.5723. *Significant at 10% level. **Significant at 1% level. Page 8 of 14 Tohmo, Cogent Arts & Humanities (2017), 4: 1296343 http://dx.doi.org/10.1080/23311983.2017.1296343 Table 3. Low willingness-to-pay (2; 4€); multinomial logit model, coefficients, t-values, rational risk ratios (rrr), base outcome is low WTP=no Variable, low WTP (2; 4€) Coefficient t-statistic rrr Yes Gender 2.669 1.52 14.424 Age (below 40 years old) 40–59 years old −3.370 −1.27 0.034 60 years old or older −4.224* −1.90 0.015 Household size (couples and families with children) Single 2.491 1.24 12.079 Education (lower than secondary education level) Secondary education level −2.956 −1.57 0.052 Higher education −1.168 −0.45 0.311 Income (low income level, below 20,000 €/year) High income (over 30,000 €/year) 2.294 1.10 9.917 Average income level (20,000–29,000 €/year) 7.243** 2.00 1398.925 Old-fashioned boring place factor −2.741* −1.84 0.064 Cultural and social factor 1.687 1.63 5.404 Reluctance factor 0.233 0.22 1.263 Image factor 1.651 1.54 5.212 Sibelius Hall will benefit the economies of Lahti, neighbouring towns and the province (no benefit) High benefit 4.606* 1.70 100.110 Average benefit 3.867 1.42 47.792 Low benefit 5.809** 2.19 333.293 Use of cultural services (5 or more visits) No visits during the past year −6.861** −2.38 0.001 1–4 visits −0.008 −0.00 0.992 Constant 1.204 0.44 I do not know Gender 2.370 1.26 10.697 Age (below 40 years old) 40–59 years old −3.739 −1.22 0.024 60 years old or older −0.432 −0.18 0.649 Household size (couples and families with children) Single 1.719 0.84 5.580 Education (lower than secondary education level) Secondary education level −0.062 −0.03 0.940 Higher education −0.792 −0.26 0.453 Income (low income level, below 20,000 €/year) High income (over 30,000 €/year) 1.374 0.60 3.951 Average income level (20,000–29,000 €/year) 4.939 1.38 139.694 Old-fashioned boring place factor −2.204 −1.43 0.110 Cultural and social factor 0.460 0.40 1.584 Reluctance factor −0.389 −0.28 0.677 Image factor 1.242 0.99 3.463 (Continued)