Spatial income inequality and the location decisions of highly-skilled workers: Evidence from the Second Industrial Revolution

Authors: Dylan Connor*, Arizona State University, Tom Kemeny, Queen Mary University of London, Michael Storper, University of California Los Angeles
Topics: Economic Geography, Population Geography, Urban Geography
Keywords: Economic geography, inequality, regional development, migration
Session Type: Paper
Day: 4/7/2020
Start / End Time: 10:15 AM / 11:30 AM
Room: Windows, Sheraton, IM Pei Tower, Second Floor Level
Presentation File: No File Uploaded

Inter-regional and interpersonal inequality have risen greatly since 1980, concentrating the skilled in prosperous cities, raising their wages relative to other workers and increasing the gaps between what they are paid in prosperous cities and other places. The current period contrasts to general decline in inequalities between 1940 and 1980. Explanations for this switch from convergence to divergence emphasize either labor supply, where the new spatial concentration of skilled and high-income workers reflects their enhanced preferences for Superstar cities, or changes in the geography of labor demand. Why would the geography of labor demand undergo a sharp change? We argue that it occurs because of a game change in the economic system around 1980, often called the Third Industrial Revolution, which has concentrated most of the high wage new technology activities in a restricted number of places. In this paper, we use the history of a prior set of game changes in labor demand to reflect on the most recent changes. In the Second Industrial Revolution, a similar pattern held, which we demonstrate using detailed data on the geography of skilled workers from 1850 to 1950. The parallels between the recent industrial revolution and a prior one demonstrate that the spatial concentration of skilled workers, with resultant increases in inter-regional inequality, reflect the technical and spatial complementarity of workers’ skills to the leading edge productive technologies of the day. Our analysis sheds new light on the forces driving trends in inequality and the dilemmas facing highly developed economies today.

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