Next job - Matera: how tourism and spotlight shape the local labour market

Tourism is an important, cross-cutting source of income and employment. As a potential tool for development, several governmental and intergovernmental initiatives have been put into place to foster tourism. We study the causal link between hosting a mega cultural event, tourism and regional development. We document evidence of profound labour market and economic expansion exploiting the exogenous variation arising from the shortlisting and subsequent nomination to the 2019 European Capital of Culture. The title was awarded to Matera, a culturally rich yet poorly connected and off-beat town in southern Italy. Through a synthetic difference-in-differences approach, we compare Matera to other Italian cities unaffected by the policy. We find a boost in tourist presence, which translates into an increase in firms and workers in the hospitality and construction sector, a decrease in overall unemployment, an increase in income, nightlight activity, and a hike in the real estate market. By analysing the timing of these impacts, we find evidence suggestive of a spot- light effect whereby media exposure raises the city’s profile since the selection phase. All in all, our findings suggest that leveraging tourism through mega events like the European Capital of Culture can provide a credible pathway to development for culturally rich but underrated destinations, particularly those with higher-than-average local unemployment levels ready to be absorbed.