Uploaded by Mujeebeco24

Mini- seminar-Mujeeb

Mujeeb Ullah, Matriculation Number: 173989
On the Relationship between Innovation and Wage Inequality: New Evidence from
Canadian Cities
Breau, Kogler and Bolton (2014) reflect the distribution of income and wages in the
cities of Canada where the innovation ratio is high. Moreover they indicate that there
is an imbalance in wages among the highly innovated cities. There are several reasons
behind this because not only a single factor like city size manufacturing, and
education etc is involved in this inequality therefore for this confirmation of they
have taken the data of Canadian census of 1996, 2001 and 2006. They have point out
different elements which could be a cause of their inequality and they also found the
way of distribution the prosperity in the society for longstanding benefits.
Innovation is the key component of economic growth and lead to the creation of new
plans, jobs and production. Big cities are the hubs of innovation due to more
education, Research, cluster and other many factors. But it is found that cities with
more innovation have different giving out of wages and this tendency have also been
observed in Canada as Canada is one of the organizations for economic cooperation
development country (OECD 2008) who have the second largest outpouring
imbalance of all (OECD) countries. In this article we will investigate the connection
of innovation and wage inequality in a number of ways and will find the reasons and
factor which causes these changes.
Innovation causes variation in income because more qualified worker needed for
dealing with latest technology and being reward more due to their high skill and
learning while people with low skill and education paid less due to their poor
understanding of the new technology so the inequality begin. Growing inequality has
not only effect on the society but it will also lead the political instability.
In theory there are certain channels which show the correlation of innovation and
income inequality and one of the main arguments of the economist is Skilled –Biased
Technological Change (STBC). According to this hypothesis the emerging of new
technology especially computer and information communication technologies needs
highly educated and skilled persons to deal with these latest technology and
machines. So they are paid highly while those people who have low technical skills
and less education are paid less which leads to inequality caused by innovation.
For empirical proofs of the positive relationship between innovation and wage
inequality in the metropolitans cities of Canada a series of panel regression analysis
have been conducted of 85 metropolitan Canadian cities for which data have been
taken from two different data sources. All measures of inequality economic and socio
demographic variable are taken from 20 percent of sample from Canada census for
1996, 2001, and 2006. And use geographical information system (GIS) to reconstruct
1996 and 2001 census metropolitan area (CMA) and census agglomeration (CA)
boundaries to their 2006 geographic definition. And secondly patent data from
UPTSO. By combining these variables in model and conducting different test and
using different statistics coefficient such as Gini coefficient and theil index the
positive relationship between innovation and income was found.
Beside the Gini coefficient and Theil index other measure were also taken to cheek
the relationship of innovation and wage inequality is Knowledge intensive business
services (KIBS). And found that cities with high concentration to KIBS employment
have more unequal distribution of earnings.
Lee and Rodríguez-Pose (2013) also affirm the positive relationship of innovation
and wage inequality in their paper in America and Europe although the reasons of the
wage inequality and innovations are different in both regions but still innovation and
wage inequality have positive relationship in both the regions.
Both studies show that innovation and inequality in wage have a positive relationship.
Large cities with more innovation have more wage inequality and the Advantages are
receiving by only high skilled and more educated people and thus create an
inequality. But if we continue our research agenda and pay more attention to the
sources of inequality at the city level and find solution of this inequality this will
increase the standard of the society overall and the locality will be assisted from the
innovation as well instead of benefitting only a few innovators and hands.
Breau S., Kogler D. and Kenyon Bolton (2014), On the Relationship Between
Innovation and Wage Inequality: New Evidence from Canadian Cities. Economic
Geography, 90, 351-373.
Lee N. and Andre´s Rodríguez-Pose (2013), Innovation and spatial inequality in
Europe and USA. Journal of Economic Geography, 13, 1-22.