Innovation and the Growth of Cities

Abstract An important problem in urban economics and cities is divergent growth rates leading to income inequality. This chapter offers a way to address the problem of divergent growth rates. Specifically, we look at the role of heterogeneity vs. specialization as an urban structure, endogenous technical change, and the importance that entrepreneurship and innovation play in the variety of local goods and the heterogeneity of the local economy both of which can mitigate the lack of convergence. Finally, an outline for a new model of regional economic growth is presented.

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