A Spatial Knowledge Economy (with Don Davis), February 2013
Latest draft (NBER WP 18188) (BibTeX)
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.
The Comparative Advantage of Cities (with Don Davis), draft coming soon
What determines the distributions of skills, occupations, and industries across cities? We develop a theory to jointly address these fundamental questions about the spatial organization of economies. Our model incorporates a system of cities, their internal urban structures, and a high-dimensional theory of factor-driven comparative advantage. It predicts that larger cities will be skill abundant and specialize in skill-intensive activities according to the monotone likelihood ratio property. We test the model using data on 270 US metropolitan areas, 3 to 9 educational categories, 22 occupational categories, and 21 manufacturing industries. The results provide support for our theory's predictions.
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