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A Measurement Issue Regarding the Link between a Region's Creative Infrastructure and its Income

Batabyal, Amitrajeet and Yoo, Seung Jick (2017): A Measurement Issue Regarding the Link between a Region's Creative Infrastructure and its Income.

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Abstract

The creative capital possessed by the members of the creative class in region j is either acquired through education or present innately in these members. Therefore, the creative infrastructure (CI_j) in the jth region is the sum of a part (CI_j^E) representing creative capital obtained through education and a second part (CI_j^I) denoting creative capital present innately in the creative class members. A researcher wishes to estimate the true relationship between the jth region’s log income per creative class member (y_j ) and its creative infrastructure (CI_j ). He has data on CI_j^E but not on CI_j^I. We study whether an ordinary least squares (OLS) regression of y_j on a constant and CI_j^E will produce an unbiased estimate of the impact of CI_j on y_j in two cases. In the first case, CI_j^E and CI_j^I are uncorrelated. In the second case, CI_j^E and CI_j^I are positively correlated.

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