The Creative Class, Bohemians and Local Labor Market Performance – A Micro-data Panel Study for Germany 1975-2004

Richard Florida’s thought-provoking concept of the Creative Class can be seen a fruitful contribution for our understanding of regional economic development because it stresses the importance of professional activities and the potential role of the cultural milieu for attracting knowledge carriers and innovative people to a location. However, previous attempts to corroborate the basic pillars of Florida’s theory typically suffer from serious deficiencies. Since correlation does not imply a causal relationship and reverse causality might be an important issue in the context of regional development, modern empirical techniques are required to look deeper at the phenomena. The present paper aims at scrutinizing two basic hypotheses of Richard Florida’s concept of the Creative Class. The first is that the regional concentration of the Creative Class entails better economic performance as measured by employment growth or an increasing wage bill. Moreover, the Creative Class concept should outperform "traditional" indicators of human capital such as the share of high-skilled workers in the regional labour force. Using a large micro data set for West Germany for the observation period 1975 to 2004 containing information on professional activities, we are able to collect panel data for 323 NUTS 3 regions. Indeed, our results indicate that Florida’s classification scheme for creative people seems have remarkable explanatory power for regional economic performance. On the basis of dynamic panel estimation we find evidence for the Creative Class playing an important role in regional economic development. In addition, the concept of measuring regional innovative capabilities by counting high-skilled persons seems to be less adequate when it comes to identify the growth potential of a region. Therefore, our econometric investigation confirms the first part of Florida’s story. The empirical findings, however, are at odds with the second part. According to Florida; the Creative Class has a taste for a liberal cultural milieu which is typically indicated by a regional concentration of Bohemians, whereas favourable economic conditions do not play a major role. For German data we cannot support this view. There is no evidence for the Creative Class following the Bohemians. By contrast, we find some support for the hypothesis that creative workers prefer living in economically prosperous regions. Moreover, the concentration of other high-skilled people seems to matter more than the concentration of Bohemians. Therefore, we are sceptical vis-à-vis a simplistic adaption of Florida’s concept by local policy makers true to the motto "Let’s create a liberal cultural scene; this will attract creative people and the region becomes an economic hot spot". Regional economic development seems to be somewhat more complex.

Möller, Joachim and Annie Tubadji (2008), The Creative Class, Bohemians and Local Labor Market Performance – A Micro-data Panel Study for Germany 1975-2004, ZEW Discussion Paper No. 08-135, Mannheim.