The Economic Contribution
of the Cultural Sector of a Small Society in a Global Context

Author: Agust EINARSSON
Published in: Vol.5 / 2004

      The aim of the paper is to analyze the economic role of cultural activities in a small society, with Iceland as the prime example, describe the contribution of cultural activities to GDP, illustrate public expenditures on cultural activities, demonstrate the impact of globalization, discuss policies to support the cultural sector and compare public expenditures on culture at the international level. Cultural activities are an important factor in most economies, and in Iceland their contribution to GDP amounts to about 3.7%.
      Culture can be regarded as public good and as a positive externality. Culture represents a significant value for each individual and it is therefore important to ensure the greatest possible access for everyone in all communities. People are trying to preserve cultural diversity, and globalization is often seen as a threat to this ideal, particularly for smaller nations. Comparison of data from 17 OECD countries illustrates that Iceland spends more than other countries on cultural activities. For countries with a relatively low population it is important to stress cultural affairs. We propose the hypothesis that governments of countries with small populations spend more on cultural affairs than countries with large populations. Statistical tests show the significance of this hypothesis.