Industrial specialization patterns across cities, agglomeration of skilled labour and technological growth

Abstract

We investigate the cumulative causation between agglomeration of skilled workers and technological growth across cities with human capital externalities and agglomeration economies. We classify industry sectors in terms of technological growth: a modern sector with improving technology and a traditional sector with mature technology. Our model includes multiple specialization patterns of modern and traditional sectors across cities. We show that both ‘the cumulative causation between the agglomeration of skilled workers and technological growth’ and ‘the impacts of transport costs on that causation’ differ across industrial specialization patterns, implying that industrial specialization patterns matter for technological growth.