Utilizing mutual learning in literature and cultural industry finance in order to realise green economic recovery and sustainability

Economic growth due to industrialization and population growth has caused an increase in excessive consumption of natural resources and disrupted the earth's ecology and climate. International and national initiatives (Kyoto Protocol, Paris Agreement, UAE National Energy Strategy 2050, China’s carbon neutrality 2060, European Green Deal) have sought to address these issues, but financing gaps remain a key reason for limited success. The COVID-19 pandemic heightened attention to environmental issues and catalyzed discourse on green economic recovery as part of sustainable development. Financing is crucial to implement green projects, and the cultural and creative industries (CCI)—including crafts, galleries, museums, advertising, and marketing—represent a significant sector influencing social welfare and economic value but often suffer from underinvestment due to perceived low profitability. The paper studies how cultural industry finance contributes to green economic growth in 16 EU countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Latvia, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden) over 2012–2021. Motivations include: strong CCI development and contribution to GDP and employment, EU policy emphasis on culture for sustainable development (e.g., European Green Deal), and the challenge of post-COVID green recovery. Contributions: construction of multi-dimensional green economy (GEI) and green economy innovation (GEII) indices and first-time evaluation of CCI’s role in EU green growth, offering new insights for creative and environmental economics.

Two strands are reviewed. First, on green economic recovery post-COVID: studies argue recovery is essential for ecosystem restoration and that fossil fuel use undermines sustainability. Evidence from the EU and Asia shows green recovery hinges on policies, energy deployment, financing tools (e.g., green bonds), and private sector support. Green bonds positively influence long-term green efficiency and support SMEs’ green strategies. Second, on cultural and creative industries: development depends on financing and government support; innovation and technological advancement are critical; energy efficiency and financial development promote CCI; CCI can bolster financial market development; new financing forms (crowdfunding, digital services) are important for CCI; corporate culture enhances firm performance. The gap identified is the absence of studies directly linking culture industry financing to EU countries’ green economic growth, motivating this research using panel methods.

Scope and data: Panel of 16 EU countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Latvia, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden) for 2012–2021. Variables: Dependent variable is the Green Economy Index (GEI) computed following Gunay et al. (2022). Key explanatory variable is the CCI market size (CCIMS) used as a proxy for cultural industry finance due to incomplete direct finance data; investment expansion is assumed to reflect market size growth. Controls include Green Economy Innovation Index (GEII) following Holger et al. (2017), financial openness (FINOPEN; Portland State University), trade in cultural commodities (TCC; Trade Map), and issued green bonds (GBOND; Climate Bonds Initiative). Expected signs: positive for CCIMS, GEII, FINOPEN, TCC, and GBOND. Estimation strategy: Preliminary diagnostics include heteroscedasticity tests (LM, LR, Wald) and cross-sectional dependence (CD) tests. Given detected cross-sectional dependence, stationarity is checked using the second-generation panel unit root test CIPS (Im, Pesaran, Shin, 2003). Model estimation uses dynamic panel Arellano-Bond GMM: Y_it = α + β Y_it-1 + γ X_it + η_it + ε_it, where Y is GEI and X includes CCIMS, GEII, FINOPEN, TCC, GBOND. Post-estimation diagnostics include Arellano-Bond autocorrelation and Sargan overidentifying restrictions tests. Robustness: Two-Stage Least Squares (2SLS) estimation is conducted as a robustness check. Variable sources are summarized: CCIMS (Eurostat, Allied Market Research), GEI (constructed), GEII (constructed), FINOPEN (Portland State University), TCC (Trade Map), GBOND (Climate Bonds Initiative).

Diagnostics: Heteroscedasticity tests (LM=254.23, LR=170.83, Wald=1015.41, all p<0.01) conducted; cross-sectional dependence found for all variables (e.g., CCIMS CD=7.39, p<0.001). CIPS unit root tests indicate all variables are I(1); first differences are stationary. Arellano-Bond dynamic GMM results (2012–2021, 16 countries, 160 obs., Wald Chi2=503.17): - CCIMS coefficient = 0.058 (p=0.048): A 1% increase in CCI market size raises GEI by 0.058%. - GEII coefficient = 0.482 (p=0.013): A 1% increase in green innovation index raises GEI by 0.48%. - FINOPEN coefficient = 0.015 (p=0.006): A 1% rise in financial openness increases GEI by 0.015%. - TCC coefficient = 0.184 (p=0.028): A 1% increase in trade of cultural goods increases GEI by 0.184%. - GBOND coefficient = 0.003 (p=0.011): A 1% increase in issued green bonds increases GEI by 0.003%. Diagnostics: Arellano-Bond AR(2) test z = -3.95 (p=0.045); Sargan test Chi2 = 1594.39 (p=0.007). Authors state the model is reliable with no issues of autocorrelation and overidentification. Robustness (2SLS; 160 obs.): All key variables remain positive and significant: CCIMS 0.192 (p<0.001), GEII 0.102 (p=0.003), FINOPEN 0.329 (p=0.041), TCC 0.049 (p=0.022), GBOND 0.012 (p=0.003); R^2=0.0795; instrument Wald stat=178.43. Overall, results consistently indicate that CCI market size, green innovation, financial openness, trade in cultural commodities, and green bonds significantly enhance the green economy index in EU countries.

Findings support the hypothesis that financing and expanding the cultural and creative industries contribute to green economic growth in EU countries. The positive effect of CCI market size suggests that culture sectors grounded in knowledge and innovation (e.g., in France and other EU nations) align with sustainability goals and help advance green technologies and practices. Green innovation acts as a key driver, reinforcing the transition to sustainable energy and manufacturing processes. Financial openness facilitates capital flows and access to green financing, enhancing the capacity for environmental investments in culture and beyond. Trade in cultural goods promotes cross-border knowledge, ideas, and green technology diffusion, reinforcing mutual learning across cultures and supporting sustainable development. Green bonds mobilize private capital for environmentally friendly projects within the cultural sector, expanding market size and contributing to the green economy. Altogether, the results indicate multiple transmission channels—from innovation and finance to trade and digital cultural services—through which CCI finance advances green growth, validating the proposed theoretical background.

The study investigates how financing the cultural and creative industries affects green economic growth in 16 EU countries during 2012–2021. Using dynamic Arellano-Bond GMM and a robustness 2SLS check, the research finds that CCI market size, green innovation, financial openness, trade in cultural goods, and green bond issuance all have positive and significant impacts on the green economy index. Policy recommendations include: expanding green financing tools within the cultural industry; leveraging green cryptocurrencies (e.g., Chia, Solana, Tezos, Avalanche) to align financial flows with sustainability goals; fostering multilateralism in cultural goods trade to disseminate green knowledge and technologies; promoting mutual learning of civilizations and cross-cultural literary exchange; and providing green government support (e.g., loans, tax incentives) for SMEs in the cultural sector. Future research should broaden country coverage to enhance generalizability and analyze culture-industry development plans for achieving sustainable development goals across different national contexts.

The study is limited to 16 EU countries over 2012–2021, which may constrain generalizability beyond the sample and period. Due to incomplete direct data on cultural industry finance, CCI market size is used as a proxy for financing, which may introduce measurement limitations. The authors suggest expanding the number of countries in future research to improve generalizability.