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Published in:
Geodemographics and Urban Planning Analysis: An Historical Review Read chapter Read first chapter

2022 | OriginalPaper | Chapter

2. When Is Competition Between Cities for Members of the Creative Class Efficient?

Authors : Amitrajeet A. Batabyal, Seung Jick Yoo

Published in: Theory and History in Regional Perspective

Publisher: Springer Nature Singapore

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Abstract

We use microeconomic theory and calculus to study two geographically contiguous cities A and B that compete for N members of the creative class by providing a local public good (LPG) that is of interest to these members. The members can costlessly move between cities A and B. We demonstrate that as a result of this mobility, the equilibrium number of members residing in each city must be such that the utility levels obtained by consuming the LPG on offer are equalized across the two cities. Next, we suppose that the LPG can be provided at unit cost and that the two cities share this cost equally among the resident members. In this setting, we show when a policy that aims to attract and retain members in a city by maximizing the utility of a representative resident member is efficient.

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previous chapter Geodemographics and Urban Planning Analysis: An Historical Review
next chapter Revisiting Marshallian Versus Walrasian Stability in an Experimental Market
Footnotes
1
See Hansen and Niedomysl (2009), Richardson (2009), and Audretsch and Belitski (2013) for a discussion of related issues.
 
2
It is important to point out that the use of “representative agent” models is common in the public finance and in the regional science literatures. For a more detailed corroboration of this point, see Nechyba (1994), Riaz et al. (1995), Conley et al. (2019), Batabyal and Yoo (2020), and Batabyal and Beladi (2021). As such, we are certainly not setting a precedent by employing a “representative resident member” construct in our analysis in this chapter.
 
3
Our rationale for equalizing the utilities across the two cities stems from the fact that in an equilibrium, there cannot be any reason for wanting to move from either city A to B or vice versa because an individual member is unhappy with the LPG provision in either city A or B. In addition, our goal here is not to use “the marginal utility of public goods” to determine the optimal allocation of a public good.
 
4
See Hindriks and Myles (2013, Chapter 6) for a textbook exposition of the “Samuelson rule.”
 
Literature
Audretsch DB, Belitski M (2013) The missing pillar: the creativity theory of knowledge spillover entrepreneurship. Small Bus Econ 41:819–836CrossRef
Batabyal AA, Beladi H (2018) Artists, engineers, and aspects of economic growth in a creative region. Econ Model 71:214–219CrossRef
Batabyal AA, Beladi H (2021) On the existence of an equilibrium in models of local public good use by cities to attract the creative class. In: Suzuki S, Patuelli R (eds) A broad view of regional science. Springer Nature, Singapore, pp 25–35CrossRef
Batabyal AA, Yoo SJ (2020) Using a local public good to attract representative creative class members: the inefficient equilibrium case. Theor Econ Lett 10:40–46CrossRef
Batabyal AA, Kourtit K, Nijkamp P (2019) Using local public goods to attract and retain the creative class: a tale of two cities. Reg Sci Policy Pract 11:571–581
Buettner T, Janeba E (2016) City competition for the creative class. J Cult Econ 40:413–451CrossRef
Conley JP, Driskill R, Wang P (2019) Capitalization, decentralization, and interregional spillovers in a Tiebout economy with a durable public good. Econ Theory 67:1–27CrossRef
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Florida R (2014) The creative class and economic development. Econ Dev Q 28:196–205CrossRef
Hansen HK, Niedomysl T (2009) Migration of the creative class: evidence from Sweden. J Econ Geogr 9:191–206CrossRef
Hindriks J, Myles GD (2013) Intermediate public economics, 2nd edn. MIT, Cambridge
Nechyba TJ (1994) Fiscal federalism and local public finance: a general equilibrium approach with voting. In: Proceedings of the Annual Conference on Taxation Held Under the Auspices of the National Tax Association—Tax Institute of America, vol 87. BiblioLife, Arkose Press, London, pp 136–141
Riaz K, Shogren JF, Johnson SR (1995) A general model of rent seeking for public goods. Public Choice 82:243–259CrossRef
Richardson KE (2009) What lures and retains the international creative-class family? A case study of the family unit found in Vancouver’s biotechnology sector. Comp Technol Transf Soc 7:323–345CrossRef
Metadata
Title
When Is Competition Between Cities for Members of the Creative Class Efficient?
Authors
Amitrajeet A. Batabyal
Seung Jick Yoo
Copyright Year
2022
Publisher
Springer Nature Singapore
Book
Theory and History in Regional Perspective

Print ISBN: 978-981-16-6694-0

Electronic ISBN: 978-981-16-6695-7

Copyright Year: 2022

DOI
https://doi.org/10.1007/978-981-16-6695-7_2