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On the Existence of an Equilibrium in Models of Local Public Good Use by Cities to Attract the Creative Class

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  • Batabyal, Amitrajeet
  • Beladi, Hamid

Abstract

We analyze a stylized model of competition between two cities that use a local public good (LPG) to attract members of the creative class. The creative class consists of artists and engineers and we study the behavior of a representative artist and an engineer. The level of the LPG in each city is determined by majority voting of the two representative creative class members. If both representative members choose to live in the same city then the LPG provision is the average of the preferred quantities of the two members. In this setting, we perform three tasks. First, we ascertain the preferred quantity of the LPG for the representative artist and the engineer. Second, assuming that the representative artist and the engineer accurately predict the outcome of living in a particular city, we describe a scenario in which there is no equilibrium in our model. Finally, we show that if the representative artist and the engineer treat the LPG provision levels in each city as exogenous then an equilibrium does exist in the model.

Suggested Citation

  • Batabyal, Amitrajeet & Beladi, Hamid, 2021. "On the Existence of an Equilibrium in Models of Local Public Good Use by Cities to Attract the Creative Class," MPRA Paper 105196, University Library of Munich, Germany, revised 07 Jan 2021.
    • Handle: RePEc:pra:mprapa:105196
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    References listed on IDEAS

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    1. Kevin Stolarick & José Lobo & Deborah Strumsky, 2011. "Are creative metropolitan areas also entrepreneurial?," Regional Science Policy & Practice, Wiley Blackwell, vol. 3(3), pages 271-286, August.
    2. Amitrajeet A. Batabyal & Karima Kourtit & Peter Nijkamp, 2019. "Using local public goods to attract and retain the creative class: A tale of two cities," Regional Science Policy & Practice, Wiley Blackwell, vol. 11(3), pages 571-581, August.
    3. Amitrajeet A. Batabyal & Peter Nijkamp, 2016. "Digital technologies, knowledge spillovers, innovation policies, and economic growth in a creative region," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(5), pages 470-484, July.
    4. Usman, Umer & Batabyal, Amitrajeet A., 2014. "Goods production, learning by doing, and growth in a region with creative and physical capital," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 92-99.
    5. Jos� Lobo & Charlotta Mellander & Kevin Stolarick & Deborah Strumsky, 2014. "The Inventive, the Educated and the Creative: How Do They Affect Metropolitan Productivity?," Industry and Innovation, Taylor & Francis Journals, vol. 21(2), pages 155-177, February.
    6. Thiess Buettner & Eckhard Janeba, 2016. "City competition for the creative class," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 40(4), pages 413-451, November.
    7. Batabyal, Amitrajeet A. & Beladi, Hamid, 2018. "Artists, engineers, and aspects of economic growth in a creative region," Economic Modelling, Elsevier, vol. 71(C), pages 214-219.
    8. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, December.
    9. Zoltán J. Ács & Pontus Braunerhjelm & David B. Audretsch & Bo Carlsson, 2015. "The knowledge spillover theory of entrepreneurship," Chapters, in: Global Entrepreneurship, Institutions and Incentives, chapter 7, pages 129-144, Edward Elgar Publishing.
    10. Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2018. "Schumpeterian creative class competition, innovation policy, and regional economic growth," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 86-97.
    11. Høgni Kalsø Hansen & Thomas Niedomysl, 2009. "Migration of the creative class: evidence from Sweden," Journal of Economic Geography, Oxford University Press, vol. 9(2), pages 191-206, March.
    12. David Audretsch & Maksim Belitski, 2013. "The missing pillar: the creativity theory of knowledge spillover entrepreneurship," Small Business Economics, Springer, vol. 41(4), pages 819-836, December.
    13. Amitrajeet A Batabyal & Hamid Beladi, 2016. "Creative capital accumulation and the advancement of India's creative economy," Environment and Planning C, , vol. 34(2), pages 356-363, March.
    14. Alden Porter & Amitrajeet A. Batabyal, 2016. "Physical capital mobility, the educational and quality aspects of creative capital, and output production," Regional Science Policy & Practice, Wiley Blackwell, vol. 8(4), pages 167-175, November.
    15. Richard Florida & Patrick Adler & Charlotta Mellander, 2017. "The city as innovation machine," Regional Studies, Taylor & Francis Journals, vol. 51(1), pages 86-96, January.
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    Cited by:

    1. Batabyal, Amitrajeet & Yoo, Seung Jick, 2019. "Using a Local Public Good to Attract Representative Creative Class Members: The Inefficient Equilibrium Case," MPRA Paper 97841, University Library of Munich, Germany, revised 11 Dec 2019.
    2. Batabyal, Amitrajeet, 2020. "Monopoly vs. Individual Welfare When a Local Public Good is Used to Attract the Creative Class," MPRA Paper 101465, University Library of Munich, Germany, revised 09 Jun 2020.
    3. Amitrajeet A. Batabyal & Hamid Beladi, 2022. "The Response of Creative Class Members to Regions Vying to Attract Them With Subsidies," International Regional Science Review, , vol. 45(5), pages 581-600, September.

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    More about this item

    Keywords

    Artist; Creative Class; Engineer; Equilibrium; Local Public Good;
    All these keywords.

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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