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SKILL, AGGLOMERATION, AND INEQUALITY IN THE SPATIAL ECONOMY
Author(s) -
Farrokhi Farid
Publication year - 2021
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12514
Subject(s) - economies of agglomeration , economics , welfare , inequality , wage inequality , productivity , census , wage , labour economics , general equilibrium theory , demographic economics , economic geography , macroeconomics , population , economic growth , market economy , sociology , mathematical analysis , demography , mathematics
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.