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Koumoutsea, A.; Boufounou, P.; Mergos, G. Evaluating the Creative Economy by Contingent Valuation Method. Encyclopedia. Available online: https://encyclopedia.pub/entry/54985 (accessed on 19 May 2024).
Koumoutsea A, Boufounou P, Mergos G. Evaluating the Creative Economy by Contingent Valuation Method. Encyclopedia. Available at: https://encyclopedia.pub/entry/54985. Accessed May 19, 2024.
Koumoutsea, Aikaterini, Paraskevi Boufounou, George Mergos. "Evaluating the Creative Economy by Contingent Valuation Method" Encyclopedia, https://encyclopedia.pub/entry/54985 (accessed May 19, 2024).
Koumoutsea, A., Boufounou, P., & Mergos, G. (2024, February 11). Evaluating the Creative Economy by Contingent Valuation Method. In Encyclopedia. https://encyclopedia.pub/entry/54985
Koumoutsea, Aikaterini, et al. "Evaluating the Creative Economy by Contingent Valuation Method." Encyclopedia. Web. 11 February, 2024.
Evaluating the Creative Economy by Contingent Valuation Method
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This entry is adapted from the peer-reviewed paper 10.3390/su152316441

The effectiveness of the economic policies implemented by a country/region directly affects its economic growth potential. Cultural Heritage Festivals are a sector of the creative economy that, by promoting culture, may have a significant impact on national/regional sustainable economic development. The Contingent Valuation Method (CVM) is an appropriate method for evaluating festivals and suggest that females, spectators with high incomes and high educational levels, and visitors to Kalamata (non-residents) show an increased Willingness To Pay. These findings can be useful to cultural heritage festival organizers in developing appropriate policy strategies: targeting the social groups with the greatest Willingness To Pay; adjusting the pricing mechanism accordingly; modifying annual memberships/donations/sponsorships, indirect resources, and tax revenues and grants; and optimizing investments and allocating resources. 

creative economy cultural heritage economic development

1. Introduction

According to ref. [1], experts worldwide have recognized the significance of assets, particularly intellectual capital (IC), knowledge, and creativity, as crucial drivers of intelligent, sustainable, and inclusive economic and social progress. This recognition stems from the growing impact of assets on economic growth and development, especially in the digital age. It implies a shift in economics, moving away from relying on assets and traditional production factors for external competitive advantages towards leveraging intangible assets and people’s core competencies for internal competitive advantages. Specifically, ref. [2] proposed that development should be approached with a focus on being smart, sustainable, and inclusive, taking into consideration the needs of humans. This should direct our efforts towards creating a world that is fair, environmentally friendly, and prosperous. Ref. [3] suggests that knowledge, creativity, and innovation are the catalysts for economic progress. As a result, intellectual capital plays a role in fostering growth and development. Ref. [4] proposes the establishment of inventive sectors primarily built upon resources, like intellectual capital. This approach would ensure a stronger footing for progress, fostering the exploration and interplay of various connections amidst social, cultural, and environmental aspects of development. Further, ref. [1] also states that cultural–creative industries allow intellectual capital to foster the positive outcomes expected to be obtained and developed in the context of sustainable development based on knowledge and innovation.
Ref. [5] recognizes culture as the fourth pillar of sustainable development. Culture is related to development in two ways: first, through the economic perspective of culture (such as cultural heritage assets, cultural tourism, etc.); and second, through the interconnection of culture to education, public policy, local economy, social cohesion, etc. [5][6][7]. Furthermore, the EU has pointed out in [8] that culture is a strategic sector for the sustainability of Europe, setting the New European Agenda for Culture.
Festivals and the tourism event industry are among the fastest-growing forms of tourism, which are often used in policy to attract visitors, with the aim of reducing seasonality and increasing revenue traffic as an indirect form of marketing [9]. Furthermore, festivals are thought to contribute socially and economically by attracting income and tourism at the local and national levels as well [10]. Cultural festivals have taken on a growing role in the cultural sector [11] and there are some destinations already well known because a festival takes place there [12].
Cultural heritage investments/projects have positive, multidimensional consequences (economic, social, indirect) that increase the well-being of the entire local/regional community. Therefore, the need to evaluate cultural investments is undeniable.
Various valuation methods could be used for the socio-economic valuation of cultural heritage projects and can be categorized as:
(a)
 Revealed Preference (RP) methods are based on the actual behavior of the users of heritage goods and services in the marketplace, whose applicability is limited to only a few ecosystem products and services. The RP methods are the following:
-
The Travel Cost Method (TCM) measures the willingness of individuals to travel to a cultural heritage site or festival, etc.
-
Hedonic Pricing (HP) is a method that investigates the Willingness To Pay (WTP) associated with attributes that correspond to the overall value. It is used primarily for real estate and environmental issues.
(b) 
Stated Preference (SP) methods are survey-based methods where respondents are asked directly about their WTP in a certain scenario. They can be applied to all types of cultural heritage goods and services; therefore, they are the methods used most often in literature. However, it should be noted that they are often criticized for being based on hypothetical scenarios and because their implementation is complex and resource consuming [13]. As noted by [14], the SP methods are the following:
-
The Contingent Valuation Method (CVM) is a survey-based method attempting to explain the WTP of participants in a hypothetical scenario using direct questions.
-
The Choice Experiment (CE) is a method based on a questionnaire whose main purpose is to discover WTP when several features change simultaneously.
The CVM is used to assess a cultural event due to its popularity and advantages that overcome the complexity and limitations of CE [15].
An indirect impact of cultural heritage is an increase in tourism. The relationship between culture and tourism is the most visible aspect of the contribution of culture to local development and growth. Tourism is a complex of economic activities with a strong interconnection with cultural heritage, as it depends on the quality and availability of local cultural heritage [16]. Europe is the most visited continent in the world, with 672,000,000 arrivals in 2017. Of total world tourism, 51% is directed to Europe, which had an 8.4% increase in visits in 2017. Therefore, tourism is an important sector for Europe and contributes 5.5% to its GDP, or 11% if its indirect impact is also calculated. This figure is largely due to the cultural wealth of Europe, which has the highest density of cultural heritage in the world. According to UNESCO [10], 413 of the 1092 cultural and naturalistic sites are in Europe. Historic buildings, heritage sites, cultural diversity, gastronomy, tourism infrastructure, etc., are some of Europe’s competitive advantages, which are vital for the tourist traffic to a destination.

2. Evaluating the Creative Economy by Contingent Valuation Method

Ref. [17] argues that the CVM has frequently been applied in various academic fields for estimating the value of nonmarket goods [18][19][20][21][22][23][24][25]. Furthermore, ref. [13] states that the CVM is the most popular method for evaluating the preferences of participants in a survey that expresses their Willingness To Pay for the consumption of cultural goods or services. By applying the CVM, economic, social, and indirect consequences are quantified in monetary terms and the evaluation results can be used for setting priorities, optimizing investments, and allocating resources.
The CVM assumes that consumers have well-defined preferences for public goods and that demand can be measured by the number of goods they are willing to sacrifice to obtain one unit of the good [26]. The CVM is widely used to assess the value of cultural goods covering a wide range of topics. The most common ones are:
  • Festivals, such as [27], where it was emphasized that the results could assist stakeholders in understanding the value created by the festival and making better decisions.
  • Museums, such as the famous study of the “Galleria Borghese” in Rome, where many scenarios were applied (such as admission fee–ticket value, services provided, and access time).
  • Historical buildings and monuments, such as the study of Fort Robiliano, where the Total Value (TEV) was determined to be approximately EUR 9,632,700 [28].
Recent studies analyzing cultural assets using the CVM [29] surveyed residents’ valuation of protecting Uiseong Gama Ssaum, a traditional Korean style of competition, as an at-risk folk activity. The estimated worth of safeguarding this practice was USD 6.06. Results demonstrated that respondents’ sense of cultural singularity was positively correlated with their willingness to support conservation financially. Investigators concluded that the research meaningfully appraised the economic value of endangered folk contests and justified preserving such traditions by providing a quantified standard for assessment. Ref. [30] explored methods to quantify people’s willingness to pay extra for goods and services that are more environmentally friendly in historic areas like Caceres, Spain. [17] found that visitors would pay on average USD 33.28 more for sustainable management of Geomun Oreum, a volcanic rock formation in South Korea. In addition to estimating economic value, the researchers examined the relationship between tour guide explanations and participants’ stated intentions to pay. Ref. [31] determined the value of conserving fireflies (Lampyridae) in Muju County, South Korea, was USD 16.58 on average, and that pro-environmental attitudes made others more open to contributing financially to firefly protection. The connection between education and willingness to support conservation was also investigated. According to [32], citizens are willing to pay USD 20.83–23.60 per person annually to protect the Li River. Using logit models, the value of preservation was determined and factors that influence Willingness To Pay in both hypothetical and real-world situations were examined. The findings confirm the effectiveness of the CVM method and offer valuable insights to guide government funding and ongoing initiatives for preserving the Li River sustainably.
There are many advantages to the CVM, primarily its flexibility, its acceptance, and its wide application by the research community, and the ease and effectiveness of the method [33][34][35]. Ref. [36] noted that despite the advantages of the CVM method, it has been criticized for having a hypothetical bias that can ultimately result in overestimating the value of nonmarket goods. To minimize the limitations of the CVM, previous CVM studies have reaffirmed respondents’ answers by adding a series of confirmation questions called “real-world” questions [37]. The most significant challenges faced by the method are the hypothetical scenario, the design of the questionnaire, and the correct application [38]. If the CVM is applied correctly (proper questionnaire design, inclusion of all relevant factors, and correct application), then evidence metrics could be provided [13].

The Application of CVM to Festivals

Festivals are among the fastest-growing forms of tourism, which are often used to attract visitors with the aim of reducing seasonality and increasing domestic traffic as an indirect form of marketing [9].
The CVM has been used in the past to assess the value of festivals and events, either by comparison with other methods (e.g., travel cost method) or by incorporating the means into models investigating economic impact or cost–benefit analysis.
Ref. [39] was one of the first researchers who implemented the CVM to estimate the economic value of the “Adelaide Grand Prix”.
Recent studies show that festivals of 10-day duration or less, in medium-sized areas, attract tourists of high economic and educational levels and have large economic benefits in the areas [40].
To compare two different methods for the assessment of a cultural heritage site and to capture their differences, ref. [41] assessed the value of two urban political institutes using the CVM and TCM. The main results of the study were that TCM is not suitable for multidimensional experiences because the entire experience of the trip is valued, not only the visit to a cultural heritage site.
Another music festival valuation study is that of [22], who calculated the use and non-use value of the “Way Out West” festival in Gothenburg using the CVM. The total value of the festival was estimated to be EUR 10,400,000.
In the study of [42], the CVM was used to assess the WTP of spectators, including locals, of a classical music festival in Santiago de Compostela. The results of the study showed that the WTP of tourists is higher than that of locals. In conclusion, the study states that the WTP estimates can be useful for estimating the social benefit of an event or festival and include a cost–benefit analysis, and a certainty analysis or pricing mechanism placement [27].
In the assessment of the “Yeongju Korean Seonbi Culture Festival” by [43], the main goal was to showcase the practical implications of local festivals to sustainable development. The findings of the study showed that previous visits, some demographic factors, and the quality of the festival environment are significant factors that affect the Willingness To Pay (WTP).
There is an extensive literature review by [44] on the use of the CVM in Arts and Culture. In the study, he points out that this method has been used for the valuation of political goods and, if used correctly, can offer a great deal to the valuation of cultural goods, such as festivals.
Festivals are a way of promoting culture as a means of social provision. Therefore, many municipal authorities have organized festivals to strengthen their local image and to attract visitors who are particularly interested. To that end, it is crucial to note the importance of festivals remaining economically independent. A major problem of this specific festival is its dependence on public grants.

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Aikaterini Koumoutsea
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Paraskevi Boufounou
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George Mergos
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