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Income Segregation and Rise of the Knowledge Economy

Author

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  • Enrico Berkes

    (Northwestern University)

  • Ruben Gaetani

    (University of Toronto)

Abstract

We analyze the effect of the rise of knowledge-based activities on spatial inequality within U.S. cities, exploiting the network of patent citations to instrument for local trends in innovation. We find that innovation intensity is responsible for 20% of the overall increase in urban segregation between 1990 and 2010. This effect is mainly driven by the clustering of employment and residence of workers in knowledge-based occupations. We develop and estimate a spatial equilibrium model to quantify the contribution of productivity and residential externalities in explaining the observed patterns. Endogenous amenities account for two thirds of the overall effect. We illustrate the relevance of the model for policy analysis by studying the impact of four proposed projects for Amazon’s HQ2 on the structure of Chicago.

Suggested Citation

  • Enrico Berkes & Ruben Gaetani, 2018. "Income Segregation and Rise of the Knowledge Economy," 2018 Meeting Papers 213, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:213
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    References listed on IDEAS

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    Cited by:

    1. Andrews, Michael J. & Whalley, Alexander, 2022. "150 years of the geography of innovation," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    2. Siedschlag, Iulia & Duran Vanegas, Juan, 2023. "Inward foreign direct investment, superstar firms and wage inequality between firms: Evidence from European regions," Papers WP770, Economic and Social Research Institute (ESRI).
    3. Victor Couture & Cecile Gaubert & Jessie Handbury & Erik Hurst, 2019. "Income Growth and the Distributional Effects of Urban Spatial Sorting," NBER Working Papers 26142, National Bureau of Economic Research, Inc.
    4. Asma Kanwal & Nwakego Eyisi, 2023. "Income Inequality and Frontend Innovation: Evidence from Frontier Markets," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 255-286, March.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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