Working Paper: NBER ID: w18188
Authors: Donald R. Davis; Jonathan I. Dingel
Abstract: 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.
Keywords: Spatial Economics; Idea Exchange; Skill Premium; Urban Economics
JEL Codes: F1; F22; J24; J61; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Skilled Workers Migration (J61) | City Size (R12) |
| Skilled Workers Migration (J61) | Productivity (O49) |
| City Size (R12) | Skill Premia (J24) |
| Idea Exchange (O36) | Productivity (O49) |
| City Size (R12) | Productivity (O49) |
| Higher Ability Individuals (D29) | City Size (R12) |