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Creative capital in production, inefficiency, and inequality: A theoretical analysis

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  • Batabyal, Amitrajeet A.
  • Nijkamp, Peter

Abstract

We analyze inefficiency and inequality associated with the use of creative capital to produce a final good. We first study a case in which the creative capital units are perfect substitutes in the production of the final good. We show that the equilibrium outcome is inefficient and that there is too little application of effort. Second, we define an indicator of inequality and show that an increase in inequality enhances efficiency and that it is possible to achieve complete efficiency. Third, we focus on the case where the individual creative capital units are perfect complements and show that the equilibrium outcome is inefficient with too little effort application. Finally, we contend that our theoretical results provide a possible rationale for the observed income inequality in cities and regions in which the activities of the creative class constitute a large part of all economic activities.

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  • Batabyal, Amitrajeet A. & Nijkamp, Peter, 2016. "Creative capital in production, inefficiency, and inequality: A theoretical analysis," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 553-558.
    • Handle: RePEc:eee:reveco:v:45:y:2016:i:c:p:553-558
    DOI: 10.1016/j.iref.2016.07.010
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    Cited by:

    1. Amitrajeet A. Batabyal, 2021. "Aspects of income inequality in a creative region," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(3), pages 727-735, December.
    2. Amitrajeet A. Batabyal & Peter Nijkamp, 2022. "Interregional Competition for Mobile Creative Capital with and Without Physical Capital Mobility," International Regional Science Review, , vol. 45(1), pages 58-73, January.
    3. Batabyal, Amitrajeet A. & Jick Yoo, Seung, 2020. "Using utilitarian and Rawlsian policies to attract the creative class: A tale of two cities," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 295-300.
    4. Kamila TURECKOVÁ & Jan Nevima & František Varadzin & Jakub Trojan & Anna Vanová & Darina Rojíková & Stanislav Martinát, 2023. "Deployment of creative actors and varieties of their impact on the quaternary sector and regional growth:a case study of NUTS2 regions of the Czech Republic," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 14, pages 181-197, June.
    5. Kamila Borseková & Anna Vaňová & Janka Šúrová & Pavol Kráľ & Kamila Turečková & Jan Nevima & Stanislav Martinát, 2021. "The Nexus between Creative Actors and Regional Development," Land, MDPI, vol. 10(3), pages 1-18, March.
    6. Amitrajeet A. Batabyal & Peter Nijkamp, 2018. "A Two-Sector Model of Creative Capital Driven Regional Economic Growth," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(3), pages 831-840, September.
    7. Amitrajeet A. Batabyal & Seung Jick Yoo, 2023. "Using Taxes to Attract the Creative Class in the Presence of a Region-Specific Rent," The Review of Regional Studies, Southern Regional Science Association, vol. 53(2), pages 182-191.
    8. Amitrajeet A. BATABYAL & Seung Jick YOO, 2019. "A Stochastic Model Of Competition Between Two Cities For Members Of The Creative Class," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(3), pages 37-42, December.
    9. Hamid Beladi & Sugata Marjit & Reza Oladi & Lei Yang, 2021. "Malnutrition in the shadow of economic growth," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 500-514, February.

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    More about this item

    Keywords

    Creative capital; Inefficiency; Inequality; Perfect complements; Perfect substitutes;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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