A Spatial Knowledge Economy

Interesting paper from the National Bureau of Economic Research- NBER (USA):
A Spatial Knowledge Economy

Donald R. Davis, Jonathan I. Dingel

NBER Working Paper No. 18188
Issued in June 2012
NBER Program(s):   ITI   LS

Leading empiricists and theorists of cities have recently argued that the generation and exchange of ideas must play a more central role in the analysis of cities. This paper develops the first system of cities model with costly idea exchange as the agglomeration force. Our model replicates a broad set of established facts about the cross section of cities. It provides the first spatial equilibrium theory of why skill premia are higher in larger cities, how variation in these premia emerges from symmetric fundamentals, and why skilled workers have higher migration rates than unskilled workers when both are fully mobile.

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