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A Spatial Knowledge Economy

  • Donald R. Davis
  • Jonathan I. Dingel

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18188.

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Date of creation: Jun 2012
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Handle: RePEc:nbr:nberwo:18188
Note: ITI LS
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  1. Marcus Berliant & Robert R. Reed, III & Ping Wang, 2000. "Knowledge exchange, matching, and agglomeration," Discussion Paper / Institute for Empirical Macroeconomics 135, Federal Reserve Bank of Minneapolis.
  2. Dan Black & Natalia Kolesnikova & Lowell J. Taylor, 2007. "Earnings functions when wages and prices vary by location," Working Papers 2007-031, Federal Reserve Bank of St. Louis.
  3. Marcus Berliant & Masahisa Fujita, 2004. "Knowledge Creation as a Square Dance on the Hilbert Cube," Game Theory and Information 0401004, EconWPA, revised 27 Jan 2004.
  4. Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," Econometrica, Econometric Society, vol. 70(6), pages 2367-2420, November.
  5. Borck, Rainald & Pflüger, Michael P. & Wrede, Matthias, 2007. "A Simple Theory of Industry Location and Residence Choice," IZA Discussion Papers 2862, Institute for the Study of Labor (IZA).
  6. Charlot, Sylvie & Duranton, Gilles, 2004. "Communication externalities in cities," Journal of Urban Economics, Elsevier, vol. 56(3), pages 581-613, November.
  7. Helsley, Robert W. & Strange, William C., 2004. "Knowledge barter in cities," Journal of Urban Economics, Elsevier, vol. 56(2), pages 327-345, September.
  8. Nathaniel Baum-Snow & Ronni Pavan, 2013. "Inequality and City Size," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1535-1548, December.
  9. Paul Beaudry & Mark Doms & Ethan Lewis, 2010. "Should the Personal Computer Be Considered a Technological Revolution? Evidence from U.S. Metropolitan Areas," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 988 - 1036.
  10. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1011-1038.
  11. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
  12. Robert E. Lucas Jr. & Benjamin Moll, 2014. "Knowledge Growth and the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 1 - 51.
  13. Jan Eeckhout & Roberto Pinheiro & Kurt Schmidheiny, 2010. "Spatial Sorting: Why New York, Los Angeles and DetroitAttract the Greatest Minds as well as the Unskilled," CESifo Working Paper Series 3274, CESifo Group Munich.
  14. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-99, November.
  15. Steve Gibbons & Henry G. Overman & Panu Pelkonen, 2010. "Wage Disparities in Britain: People or Place?," SERC Discussion Papers 0060, Spatial Economics Research Centre, LSE.
  16. Jorge De la Roca, 2011. "Selection in initial and return migration: Evidence from moves across Spanish cities," Working Papers 2011-21, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  17. Emi Nakamura & Jón Steinsson, 2011. "Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions," NBER Working Papers 17391, National Bureau of Economic Research, Inc.
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