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A tale of two cities: Communication, innovation, and divergence

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  • Stefano Magrini
  • Alessandro Spiganti

Abstract

We present a two‐area endogenous growth model where abstract knowledge flows at no cost across space but tacit knowledge arises from the interaction among researchers and is hampered by distance. Digital communication reduces this “cost of distance” and reinforces productive specialization, leading to an increase in the system‐wide growth rate but at the cost of more inequality within and across areas. These results are consistent with evidences on the rise in the concentration of innovative activities, income inequality, and skills and income divergence across US urban areas.

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  • Stefano Magrini & Alessandro Spiganti, 2024. "A tale of two cities: Communication, innovation, and divergence," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 390-413, January.
    • Handle: RePEc:bla:ecinqu:v:62:y:2024:i:1:p:390-413
    DOI: 10.1111/ecin.13175
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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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