Knowledge-based spatial differences in economic activity,job related migration and housing related migration

This paper analyzes the mutual effects of growth of cities and migration between cities. A model in which cities manufacture goods in a traditional sector and in a technological sector, and each city exhibits independently learning-by-doing in the latter sector is presented. The possibility that the development of one city prevents the development of the other is demonstrated. The higher wage in the developed city attracts the talented residents of the less developed city, to which less talented residents migrate in search of lower housing prices, thus creating bi-directional migration that reinforces the above result. An empirical analysis of the differences between job-related migration and housing-related migration in the U.S. is conducted, finding that these two streams are indeed in-line with the model’s prediction. Implications for regional development policies are discussed.