Frequently Asked Questions - Arts and Economic Prosperity

Any time money changes hands, there is a measurable economic impact. Social service organizations, libraries, and all entities that spend money have an economic impact. What makes the economic impact of arts and cultural organizations unique is that, unlike most other industries, they induce large amounts of event-related spending by their audiences. For example, when patrons attend a performing arts event, they may purchase dinner at a restaurant, eat dessert after the show, and return home and pay the babysitter. These expenditures have a positive and measurable impact on the economy.

Yes, the Arts & Economic Prosperity 5 study makes a strong argument to elected and appointed government leaders.

AEP5 National Partners are organizations of public and private sector leaders that steer billions of dollars in public and private sector arts funding and create arts-friendly policies. They are partners because, (1) they too believe the arts are a fundamental component of a healthy community, and (2) they approve of the methodology and findings. Their logos are on the back cover of every AEP5 report. This boost your credibility when advocating with the data. Be sure your mayor knows the U.S. Conference of Mayors and National League of Cites are partners. Be sure your city manager know that International City/County Management Association is a partner. Be sure your private funders know that Council on Foundations and Independent Sector are partners. Be sure your business leaders know that the Conference Board and Committee encouraging Corporate Philanthropy are partners. Be sure your tourism and economic development people know that Destinations International and National Alliance of community Economic Development Associations are partners.

It will be up to the user of this report to educate the public about economic impact studies in general and the results of this study. The user may need to explain (1) the study methodology used, (2) that economists created an input-output model for each community and region in the study, and (3) the difference between input-output analysis and a multiplier (see facing page). The good news is that as the number of economic impact studies completed by arts organizations and other special interest areas increases, so does the sophistication of community leaders whose influence these studies are meant to affect. Today, most decision-makers want to know what methodology is being used and how and where data was gathered. You can be confident that the input-output analysis used in this study is a highly-regarded model in the field of economics (input-output analysis was the basis of two Nobel Prizes in economics). As in any professional field, however, there is disagreement about procedures, jargon, and the best way to determine results. Ask 12 artists to define art and you will get 12 answers; expect the same of economists. You may meet an economist who believes that these studies should be done differently (for example, a cost-benefit analysis of the arts). It is also valuable to mention the conservative approach used by AEP5. For example, organizational expenditures are based only on the data collected. No estimates are made for nonresponding organizations. The audience surveys are conducted at a broad range of cultural events to ensure a representative sample, and not just at the highest priced venues, which would inflate the audience spending averages.

Because of the variety of communities studied and the rigor with which the AEP5 study was conducted, nonprofit and public sector arts and cultural organizations located in communities that were not part of the study can estimate their local economic impact. Estimates can be derived by using the Arts & Economic Prosperity 5 Calculator. Additionally, users will find sample PowerPoint presentations, press releases, op-eds, and other strategies for effective applications of their estimated economic impact data.

In 2015, Americans for the Arts published a call for communities interested in participating in the AEP5 study. Of the more than 300 organizations that expressed interest, 250 agreed to participate and complete the study’s four participation criteria. Some partners requested that multiple study regions be included in their study (for example, a county as well as a specific city within the county). As a result, the 250 study partners represent a total of 341 participating study regions.

To learn more about our study partners and download a complete list of study regions, visit the Local Findings page.

Each of the 250 study partners identified the universe of nonprofit arts and cultural organizations located in its region(s). Eligibility was determined using the Urban Institute’s National Taxonomy of Exempt Entities (NTEE) coding system as a guideline. Communities were encouraged to include other types of eligible organizations if they play a substantial role in the cultural life of the community or if their primary purpose is to promote participation in, appreciation for, and understanding of the visual, performing, folk, literary, and media arts. These include government-owned or operated cultural facilities and institutions, municipal arts agencies or councils, living collections (such as zoos and botanical gardens), university museums and presenters, and arts programs that are embedded under the umbrella of a nonarts organization or facility. For-profit businesses and individual artists were strictly excluded from this study. In short, if it displays the characteristics of a nonprofit arts and cultural organization, it was included.


An input-output analysis model was customized for each of the 341 participating communities and regions to determine the local economic impact of their nonprofit and public sector arts and cultural organizations and their audiences. Americans for the Arts, which conducted the research, worked with a highly-regarded economist from the Georgia Institute of Technology to design and customize the input-output models used in this study.

To learn more about the methodology of this study, download our Detailed Study Methodology Guide. (PDF)

In addition to detailed expenditure data provided by the participating eligible organizations, extensive wage, labor, tax, and commerce data were collected from local, state, and federal governments for use in the input-output model.

Researchers assume that admission fees paid by attendees are collected as revenue by the organization that is presenting the event. The organizations then spend those dollars as part of its operating budget. Since the ticket fees are captured in the organization’s operating budget, admissions paid by attendees are excluded from the overall analysis to avoid double counting.

When many people hear about an economic impact study, they expect the result to be quantified in what is often called an economic activity multiplier. The multiplier is an estimate of the number of times a dollar changes hands within the community (e.g., a theater pays its actor, the actor spends money at the grocery store, the grocery store pays the cashier, and so on). It is quantified as one number by which expenditures are multiplied. The convenience of the multiplier is that it is one simple number. Users rarely note, however, that the multiplier is developed by making gross estimates of the industries within the local economy and does not allow for differences in the characteristics of those industries. Using an economic activity multiplier usually results in an overestimation of the economic impact and therefore lacks reliability.



No, grant dollars should not be double-counted in the analysis. The Organizational Expenditure Survey instructed the responding organizations to exclude any dollars that were awarded as grants or contracts to other nonprofit arts and culture organizations. Similarly, researchers removed from the economic impact analysis expenditures that were identified in Cultural Data Project profiles as grantmaking dollars.

Like all other industries, the nonprofit arts and culture experienced significant economic headwinds during 2010. Between 2005 and 2010, unemployment rose from 5.1 percent to 9.7 percent. The Consumer Confidence Index fell from 101 to 54. Home foreclosures tripled to 2.9 million. Nationally, nonprofit arts and culture organizations demonstrated resiliency throughout The Great Recession. Some major institutions were forced to close their doors, but many new organizations were founded. As a result, pre-recession gains in aggregate organizational spending were lost in the recession, and as a result the industry experienced a modest decrease in aggregate spending by organizations. The most significant impact of the Great Recession was with regard to event-related spending by arts audiences. As consumer spending declined, arts audiences stayed closer to home and spent less. The average attendance to arts events declined modestly, as did tourism, leisure travel, and attendance to professional sports events.

There are three key reasons that the Arts & Economic Prosperity series focuses solely on the nonprofit arts and culture sector. 

(1) The findings dispel the myth that the nonprofit arts and culture sector is an economic "black hole" and provide proof that when people, corporations, foundations, and governments support the nonprofit arts, they are also supporting economic and community development;

(2) Because nonprofit arts associations are often the recipient of public funding, the availability of valid and accurate economic impact data about the sector is critical; and

(3) The information necessary to complete an economic impact study is more easily obtained from the nonprofit sector than from the for-profit sector since nonprofit sector data is treated as public information and available through IRS Form 990 filings.

The Arts & Economic Prosperity IV study’s four economic impact findings (full-time equivalent jobs, resident household income, and local and state government revenues) are calculated by the input-output models that were customized by the project economists for the unique economies of each of the 182 participating study regions. The "inputs" are the financial information collected from the eligible nonprofit arts and culture organizations in each study region as well as the information collected from the audience-intercept surveys in each study region. The "outputs" are the four economic impact findings that are generated by the industry. The input-output models are based on a table of 533 finely detailed industries showing local sales and purchases. The local and state economy of each study region is researched so the table can be customized for each. The basic purchase patterns for local industries are derived from a similar table for the U.S. economy for 2007 (the latest detailed data available from the U.S. Department of Commerce). The table is first reduced to reflect the unique size and industry mix of the local economy, based on data from County Business Patterns and the Regional Economic Information System of the U.S. Department of Commerce. It is then adjusted so that only transactions with local businesses are recorded in the inter-industry part of the table. This technique compares supply and demand and estimates the additional imports or exports required to make total supply equal total demand. The resulting table shows the detailed sales and purchase patterns of the local industries. The 533-industry table is then aggregated to reflect the general activities of 32 industries plus local households, creating a total of 33 industries. To trace changes in the economy, each column is converted to show the direct requirements per dollar of gross output for each sector. This direct-requirements table represents the "recipe" for producing the output of each industry.