SKILL, AGGLOMERATION, AND INEQUALITY IN THE SPATIAL ECONOMY
- Resource Type
- Authors
- Farid Farrokhi
- Source
- International Economic Review. 62:671-721
- Subject
- Wage inequality
Economics and Econometrics
Inequality
Technological change
Economies of agglomeration
media_common.quotation_subject
05 social sciences
Spatial equilibrium
0502 economics and business
Economics
Demographic economics
050207 economics
Productivity
Welfare
050205 econometrics
media_common
- Language
- ISSN
- 1468-2354
0020-6598
This paper develops a spatial equilibrium model with skill heterogeneity and agglomeration forces that stem from local idea exchange. I structurally estimate the model using American census data to study policy effects on real wage inequality between and within college and noncollege workers. Using the estimated model, I find: (1) Skill composition and local spillovers, respectively, account for 30% and 70% of the city‐level relationship between productivity and employment. (2) Recent skill‐biased technological changes largely increased the welfare inequality between groups and within college workers. (3) Small transfers from larger to smaller cities may reduce inequality without changing aggregate welfare.