Immigrant diversity and economic development in cities: a critical review

This paper reviews a growing literature investigating how ‘immigrant’ diversity relates to urban economic performance. As distinct from the labor-supply focus of much of the economics of immigration, this paper reviews work that examines how growing heterogeneity in the composition of the workforce may beneficially or harmfully affect the production of goods, services and ideas, especially in regional economies. Taking stock of the existing literature, the paper argues that the low-hanging fruit in this field has now been picked, and lays out a set of open issues that need to be taken up in future research in order to fulfil the promise of this work

Specialization and regional economic development

Debates about urban growth and change often center on specialization.However, arguments linking specialization to metropolitan economic development contain diverse, and sometimes conflicting, claims. Is it better to be highly specialized or diversified? Does specialization refer to the absolute scale of an activity in a region, its share within the regional economy, or its share in the nation’s economy? Does specialization have static effects, or is its impact chiefly evolutionary? This paper starts by investigating these different theoretical claims. We then turn to an empirical inquiry into the roles of relative and absolute specialization. By analyzing local agglomerations over time, we find that growing absolute specialization is positively linked to wages, while changes in relative concentration are not significantly associated with wage dynamics. This supports notions of specialization based on the absolute size of an agglomeration, and casts doubt on notions of specialization based on shares of an activity in the regional economy

Spillovers from immigrant diversity in cities

Using comprehensive longitudinal matched employer-employee data for the U.S., this paper provides new evidence on the relationship between productivity and immigration-spawned urban diversity. Existing empirical work has uncovered a robust positive correlation between productivity and immigrant diversity, supporting theory suggesting that diversity acts as a local public good that makes workers more productive by enlarging the pool of knowledge available to them, as well as by fostering opportunities for them to recombine ideas to generate novelty. This paper makes several empirical and conceptual contributions. First, it improves on existing empirical work by addressing various sources of potential bias, especially from unobserved heterogeneity among individuals, work establishments, and cities. Second, it augments identification by using longitudinal data that permits examination of how diversity and productivity co-move. Third, the paper seeks to reveal whether diversity acts upon productivity chiefly at the scale of the city or the workplace. Findings confirm that urban immigrant diversity produces positive and nontrivial spillovers for U.S. workers. This social return represents a distinct channel through which immigration generates broad-based economic benefits

Superstar cities and left-behind places: disruptive innovation, labor demand, and interregional inequality

After a long period of convergence, around 1980, inter-place gaps in economic well-being in the United States began to increase. This rising inequality offers a rich terrain to explore causality in regional economics and development theory. This paper presents new, long-run evidence on interregional inequality that highlights the need to situate the current moment in a context of episodic alternations between convergence and divergence. In light of this evidence, the paper revisits the theoretical literature, finding gaps in existing supply- and demand-side models. A demand-led perspective can be strengthened by integrating a primary role for disruptive technological change. We posit a theory of alternating waves, where major technology shocks initially concentrate, and eventually deconcentrate, demand for skilled workers performing complementary tasks. Labor supply responds to these centripetal and centrifugal forces. These reversals yield the observed patterns of rising and falling interregional inequality. We trace out the implications of this theory in both academic and policy terms

Immobility and support for Leave: Brexit was partly a reaction to change from the locally rooted

Popular explanations of the Brexit vote have centred on the division between cosmopolitan internationalists who voted Remain, and geographically-rooted individuals who voted Leave. Katy Morris, Neil Lee, and Thomas Kemeny write that residential immobility also matters. They explain why those living in their county of birth were more likely to support Leave. However, the impact of immobility was filtered by local circumstances: immobility only mattered for respondents living in areas experiencing relative economic decline or increases in migrant populations

The transformative effects of tacit technological knowledge

Tacit knowledge – ideas that cannot readily be meaningfully and completely communicated – has long been considered a precursor to scientific and technological advances. Using words and phrases found in the universe of USPTO patents 1940-2020, we propose a new method of measuring tacit knowledge and its progressive codification. We uncover a discontinuity in the production of highly tacit technologies. Before 1980, highly- and less-tacit inventions are evenly distributed among inventors, organizations, scientific domains and subnational regions. After 1980, inventors of highly tacit patents become relatively rare, and increasingly concentrated in domains and locations. The economic payoffs to tacit knowledge also change, as it starts unequally rewarding high-income workers. This suggests a role for tacit knowledge in contributing to the rise in income inequality since 1980

GEOWEALTH: spatial wealth inequality data for the United States, 1960-2020

Wealth inequality has been sharply rising in the United States and across many other high-income countries. Due to a lack of data, we know little about how this trend has unfolded across locations within countries. Investigating this subnational geography of wealth is crucial, as from one generation to the next, wealth powerfully shapes opportunity and disadvantage across individuals and communities. Using machine-learning-based imputation to link newly assembled national historical surveys conducted by the U.S. Federal Reserve to population survey microdata, the data presented in this paper addresses this gap. The Geographic Wealth Inequality Database (“GEOWEALTH”) provides the first estimates of the level and distribution of wealth at various geographical scales within the United States from 1960 to 2020. The GEOWEALTH database enables new lines of investigation into the contribution of spatial wealth disparities to major societal challenges including wealth concentration, spatial income inequality, social mobility, housing unaffordability, and political polarization

A tale of two cities: how San Francisco surged forward while LA fell behind

For most of the twentieth century, the Los Angeles region had one of the county’s best performing economies. But now, incomes of those in the San Francisco Bay area outpace those in LA by a third. In their new book, Michael Storper, Thomas Kemeny, Naji Makarem, & Taner Osman take a close look at how San Francisco has thrived while Los Angeles stagnated. They argue that the Bay Area created an ecosystem of invention and innovation that allowed Silicon Valley to arise and thrive, even as LA’s industries remained largely siloed

U.S. wage inequality and low-wage import competition

This article examines the impact of import competition from low-wage countries (LWCs) on wages and wage inequality in the U.S. over the period 1972-2006. During the 1990s, studies appeared to settle this issue, finding that technology, not trade, accounted for the bulk of rising inequality. This paper revisits the link between trade and wages, motivated by two changes in the structure of trade. First, trade today is shaped as much by the exchange of components and tasks as finished goods. Second, import volumes from LWCs into advanced economies like the U.S. have risen dramatically since the early 1990s. The paper pays special attention to the timing of trade impacts. Consistent with prior work, it shows that technological change is the primary driver of inequality before 1990. However, after 1990 wage inequality growth is chiefly a function of rising import competition from low-wage economies. To account for the growing fragmentation of production within economic sectors, we explore trade impacts using a panel model where the focus in on within- rather than between-industry shifts in inequality. Lags of key variables are used as instruments, and our results appear robust to broad concerns with endogeneity and to different measures of skill-biased technological chang