Research and Analysis

A R T  A N D  M O N E Y

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by William N. Goetzmann, Luc Renneboog, Christophe Spaenjers

National Bureau of Economic Research

  • “Motivated by a growing literature on stock market wealth effects and the effects of income dispersion on the prices of real assets, this article has investigated how investment and employment income – more generally, money – determines the price of art. We are able to confirm and strengthen previous evidence that equity market movements affect art prices, using a newly constructed art price index. This result is robust to many different specifications and holds even when we split the overall 1830-2007 time frame in two subperiods. We find weaker evidence for the impact of income inequality.
  • Although there is evidence that changes in income inequality had an important effect on British art prices in the first half of the twentieth century, and that this effect is significant for the overall time frame, we do not confirm the result for the post-war period. Arguably more important, however, is that we find co-integrating relationships between top incomes and art prices, both for the total 1908-2005 period and since 1945. Taken together, these results demonstrate that it is indeed the money of the wealthy that drives art prices. This implies that we can expect art booms whenever income inequality rises quickly. This seems exactly what we witnessed during the last period of strong art price appreciation, 2002-2007. Indeed, in many countries with large numbers of art buyers, income inequality has risen significantly in those years, mainly due to strong increases in managerial compensation.”
  • Excerpted from:

National Bureau of Economic Research,

William N. Goetzmann, Luc Renneboog, Christophe Spaenjers

http://www.nber.org/papers/w15502

 

 

A R T  A S  A  P R O X Y  F O R  T H E  R I S E  O F  T H E  S U P E R-R I C H

 

By ADAM DAVIDSON

Published: May 30, 2012

New York Times

Excerpted from:

http://www.nytimes.com/2012/06/03/magazine/how-the-art-market-thrives-on-inequality.html