Economic Foundations of Unequal Development
Economic Foundations of Unequal Development
Knowledge, Skills, Social Imitation, and Production Externalities
Development requires both ability and coordination, but the abilities and practices that facilitate coordinating production contribute decisively to inequality. The second hypothesis is introduced: Inherent properties of knowledge transmission, the skill-matching requirements of team production, patterns of social imitation, and production interdependencies generate starkly unequal locational and sectoral agglomerations of production, knowledge acquisition, innovation, and growth. To illustrate these points, this chapter relates individual incentives to invest in acquiring skills and education to these influences. People in areas with high concentrations of knowledge and skill encounter strong incentives to work on acquiring knowledge—and vice versa. Additionally, developing sophisticated production techniques requires a critical mass of suitable firms in order to create viable markets and for skilled labor and sophisticated equipment. Difficult coordination CAPs lead to patterns of unbalanced growth. Finally, rural-to-urban migration often reinforces these locational dynamics.
Keywords: production externalities, nonrival, social imitation, coordination problems, locational agglomeration, poverty trap
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