Knowledge spillovers in cities: An auction approach

Victor Couture

Journal of Economic Theory, 2015, vol. 157, issue C, 668-698

Abstract: This paper proposes a micro-foundation for knowledge spillovers. I model a city in which free knowledge transfers are bids by experts to entrepreneurs who auction jobs. These knowledge bids resemble a consultant's pitch to a potential client. Two fundamental properties of knowledge underlie the model: First, it is often necessary to reveal some knowledge to demonstrate its value. Second, knowledge is freely reproducible. Larger cities generate more meetings between experts and entrepreneurs, resulting in more learning and better matches. Larger cities also foster competition for jobs, which motivates experts to raise their knowledge bids. These results demonstrate how competitive behavior can be a source of agglomeration economies, and contribute to explain the higher productivity of urban workers.

Keywords: Agglomeration; Auction; Knowledge spillovers (search for similar items in EconPapers)
JEL-codes: D44 D83 R23 R39 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:157:y:2015:i:c:p:668-698

DOI: 10.1016/j.jet.2015.01.022

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