The Causal Relationship of Public Expenditure on Culture and Sustainable Development: The Case of the European Union

In the literature of economics, culture is a public good that is largely influenced by public expenditure, policies and government interventions. On the other hand, sustainable development (encompassing economic, social and environmental dimensions) has become the dominant paradigm in the discourse of governments and international institutions. Therefore, investigating causal relationships between cultural expenditure (as an indicator of the relative importance of the cultural sector in public policy-making of governments) and the various dimensions of sustainable development can help explain the importance of culture in development policies. In this regard, the present paper examines these causal relationships using the panel vector error-correction (PVEC) model for the European Union countries during the period 2000 to 2015. The results indicated that the cultural expenditure (share of total expenditure or GDP) is the Granger causality of the indicators of sustainable development. In addition, an inverse causal relationship from development to public expenditure on culture confirms some of the indicators of sustainable development such as public expenditure on education, the level of citizens’ confidence, gross domestic product, and the final consumption expenditure of households.