The economic impact of UNESCO World Heritage: Evidence from Italy
Bertacchini E., Revelli F., Zotti R., 2024 – Regional Science and Urban Economics
Heritage designation is a policy intervention commonly recognized to bear considerable consequences on the economies of cities and regions where heritage sites are located, as well as on the welfare of local communities. It influences the real estate market through legal constraints on the development and use of buildings and the demand for amenity value households place on the historic built environment and its conservation. Of the different types of heritage listing, the UNESCO World Heritage designation is pivotal in discussions about the economic impact of cultural heritage. Originally, the UNESCO World Heritage List (WHL) focused on preserving and protecting sites of exceptional value. However, in recent years, the designation process has increasingly been viewed as a tool for territorial marketing and a catalyst for place-making. Entering the WHL attracts significant attention from the media, the general public, potential donors, and businesses. This recognition often prompts countries and regions to leverage their economic and political resources to influence the WHL designation process. As a result, the expectation of a positive economic impact from the World Heritage designation justifies the considerable efforts required to apply for and achieve UNESCO recognition eventually.
What are the effects of UNESCO World Heritage Designations on local economic outcomes? In a recent study, “The economic impact of UNESCO World Heritage: Evidence from Italy”, published in Regional Science and Urban Economics, Enrico Bertacchini, Federico Revelli, and Roberto Zotti investigate the impact of the UNESCO WHL inscription on income and property values in Italian municipalities during the past two decades. Italy constitutes an ideal environment for analysing the impact of UNESCO designations because of the considerable number of World Heritage Sites and its decentralised government structure, with regional and local governments playing an active role in the application process for heritage site recognition.
To address the fundamental endogeneity issue arising from the fact that the trajectories of outcomes in treated municipalities might differ significantly from those in the other municipalities even before the official UNESCO designation, the authors focus on the sample of localities having their sites included in the national Tentative List (TL) during the period of observation. Since the national TL is a procedural requirement for a government to propose heritage sites for eventual designation into the UNESCO WHL, the timing of WHL designation conditional on entering the TL can be taken as plausibly random.
Using a staggered difference-in-differences (DiD) design proposed by Callaway and Sant’Anna (2021), the event study analysis shows that World Heritage designation in Italy positively impacts taxable income per capita, with an increase of about 2% five years after the designation (Figure 1, panel a). At the same time, the consequences in the real estate market are more nuanced. While any impact of the World Heritage designation on ordinary apartments is hardly found, the prices of luxury dwellings in highly urbanised areas rise by almost 10% in the first five years, but not in rural areas where housing supply is arguably more elastic (Figure 1, panel b). Finally, the prices of commercial properties rise significantly in both urban and rural areas, though the effect is more persistent in the latter.
Based on this evidence, the analysis further investigates possible transmission mechanisms of WHL designation on local economic outcomes. First, to test the tourism-led growth channel, a hypothesis frequently made in the literature, the trajectories of official tourist flows in treated and control municipalities around designation years are studied and emerge to be compatible with the hypothesis of increased touristic visibility of a locality after WHL designation (Figure 2, panel a). Next, the focus turns to test the sorting hypothesis based on the idea that the increased amenity value of sites after the WHL inscription attracts wealthy individuals with a high valuation of those amenities. Although data on mobility by income level are not available, it is observed that the resident population and the share of high-income taxpayers grow faster in treated localities after designation, compatibly with a hypothesis of “gentrification” leading to a change in the composition of residents and a higher demand for luxury dwellings (Figure 2, panel b).
Overall, the study contributes to the debate on the economic effects of UNESCO designations by providing original evidence on how the heritage value signaled by the process of UNESCO listing affects property values at the municipal level. Moreover, the analysis of the impact of WHL designation on the level and distribution of income relates to the ‘‘tourism gentrification’’ literature studying how urban revitalisation policies generating massive flows of capital in the real estate markets of ordinary middle-class neighbourhoods can produce radical social reconfigurations and transform them into affluent enclaves. Based on the Italian context, the evidence obtained is also likely to be valid for other European countries with similar cultural heritage characteristics and economic dynamics. However, the documented positive effects on local economies may arise from dynamics that are not necessarily favourable to residents. In particular, the phenomenon of limited land for housing development, particularly in highly urbanised areas, coupled with the increase in demand for second home ownership and bids for renovated and refurbished structures, is bound to lead to competition between ‘‘external’’ groups and residents, with ‘‘exclusionary’’ consequences due to shortages of affordable housing and displacement or relocation of the most vulnerable segments of the population, including workers in tourism-related sectors. This is an important dimension of the issue, not investigated in this study, but worth being addressed in future analyses of the socioeconomic impact of UNESCO WHL designations.