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A Tale of Two Cities: Communication, Innovation, and Divergence

Stefano Magrini and Alessandro Spiganti

No 2021:28, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We present a two-area endogenous growth model where abstract knowledge flows at no cost across space but tacit knowledge arises from the interaction among researchers and is hampered by distance. Digital communication reduces this "cost of distance" and reinforces productive specialization, leading to an increase in the system-wide growth rate but at the cost of more inequality within and across areas. These results are consistent with evidences on the rise in the concentration of innovative activities, income inequality, and skills and income divergence across US urban areas.

Keywords: Agglomeration; specialization; digital communication; inequality; patents (search for similar items in EconPapers)
JEL-codes: J24 O31 O41 R12 (search for similar items in EconPapers)
Pages: 55 pages
New Economics Papers: this item is included in nep-geo, nep-gro, nep-lma and nep-ure
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Journal Article: A tale of two cities: Communication, innovation, and divergence (2024) Downloads
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