A NOTE ON THE USE OF AMENITIES TO ATTRACT CREATIVE CLASS MEMBERS TO A CITY

Amitrajeet A. BATABYAL

Arthur J. Gosnell Professor of Economics, Department of Economics, Rochester Institute of Technology, Rochester, NY 14623-5604, USA

aabgsh@rit.edu

Seung Jick YOO

Associate Professor, Sookmyung Women’s University, Seoul, Republic of Korea

sjyoo@sookmyung.ac.kr

Corresponding Author

Abstract

We study the decision problem faced by a city authority (CA) who seeks to attract members of the creative class to his city by providing amenities. Creative class members care about their own incomes and about the amenities that the city provides. We construct a stylized model of this interaction and shed light on three questions. First, we determine how much additional income must be paid to a representative creative class member to maintain her utility if amenities are withdrawn. Second, we compute the cost of generating amenity benefits that equal a specific fraction of the representative creative class member’s income. Finally, we discuss whether the provision of amenity benefits is a cost-effective way of raising the representative creative class member’s utility.

Keywords: Amenity Benefits, City Authority, Cost-Effectiveness, Creative Class, Income

JEL classification: R11, R50

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A STOCHASTIC MODEL OF COMPETITION BETWEEN TWO CITIES FOR MEMBERS OF THE CREATIVE CLASS

Amitrajeet A. BATABYAL

Arthur J. Gosnell Professor of Economics, Department of Economics, Rochester Institute of Technology, Rochester, NY 14623-5604, USA

aabgsh@rit.edu

Seung Jick YOO

Graduate School of International Service, Sookmyung Women’s University, Seoul, Republic of Korea

sjyoo@sookmyung.ac.kr

*Corresponding Author

Abstract

Batabyal and Yoo (2019) have recently obtained a significant result in their analysis of the use of utilitarian and Rawlsian policies by two cities to attract the creative class. They show that if one city switches to a Rawlsian or more egalitarian objective when the other city remains utilitarian, the aggregate economy of two cities becomes less egalitarian. We show that this result depends fundamentally on the assumption that the creative class population can be described by a triangular probability distribution. If this population is modeled instead with an inverted triangular probability distribution then the above result is reversed in the sense that the welfare of the worst-off member of the creative class is always enhanced when one city switches to a Rawlsian or more egalitarian objective, irrespective of the objective of the other city.

Keywords: City, Competition, Creative Class, Rawlsian, Utilitarian

JEL classification: R11, D63
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A NOTE ON SCHUMPETERIAN COMPETITION IN THE CREATIVE CLASS AND INNOVATION POLICY

Amitrajeet A. BATABYAL

Department of Economics, Rochester Institute of Technology, 92 Lomb Memorial Drive, Rochester, NY 14623-5604, USA.

aabgsh@rit.edu

Seung JICK YOO

Corresponding Author. Graduate School of International Service, Sookmyung Women’s University, 100 Cheongpa-ro 47-gil, Yongsan-gu, Seoul, Republic of Korea.

sjyoo@sookmyung.ac.kr

Abstract

We study innovation policy in a region in which the members of the creative class engage in Schumpeterian competition and thereby extend aspects of the recent analysis in Batabyal and Yoo (2017). Using the language of these researchers, the creative class is broadly composed of existing and candidate entrepreneurs. In contrast to these researchers, we suppose that R&D by candidate entrepreneurs does not generate any negative externalities. In this setting, we analyze the impact that taxes and subsidies on R&D by existing and candidate entrepreneurs have on R&D expenditures and regional economic growth.

Keywords: Creative Class, Creative Destruction, Economic Growth, Innovation Policy, R&D

JEL classification: R11, O31, O38
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