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Skill, Agglomeration, And Inequality In The Spatial Economy

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  • Farid Farrokhi

Abstract

This paper develops a spatial equilibrium model with skill heterogeneity and agglomeration forces that stem from local idea exchange. I structurally estimate the model using American census data to study policy effects on real wage inequality between and within college and noncollege workers. Using the estimated model, I find: (1) Skill composition and local spillovers, respectively, account for 30% and 70% of the city‐level relationship between productivity and employment. (2) Recent skill‐biased technological changes largely increased the welfare inequality between groups and within college workers. (3) Small transfers from larger to smaller cities may reduce inequality without changing aggregate welfare.

Suggested Citation

  • Farid Farrokhi, 2021. "Skill, Agglomeration, And Inequality In The Spatial Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(2), pages 671-721, May.
    • Handle: RePEc:wly:iecrev:v:62:y:2021:i:2:p:671-721
    DOI: 10.1111/iere.12514
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