Creative Capital, Information and Communication Technologies, and Economic Growth in Smart Cities

Batabyal, Amitrajeet and Nijkamp, Peter (2018): Creative Capital, Information and Communication Technologies, and Economic Growth in Smart Cities.

Abstract

We study aspects of economic growth in a stylized smart city with two distinct features. First, the modeled inhabitants of this city are smart because they possess skills. Using the language of Richard Florida, these inhabitants comprise the city’s creative class and hence they possess creative capital. Second, the city is smart because it uses information and communication technologies (ICTs) and we model one specific kind of ICT use. In this setting, we first derive expressions for three growth related metrics. Second, we use these metrics to show that the economy of smart city A converges to a balanced growth path (BGP). Third, we compute the growth rate of output per effective creative capital unit on this BGP. Fourth, we study how heterogeneity in initial conditions affects outcomes on the BGP by introducing a second smart city B into the analysis. At time t=0, two key savings rates in city A are twice as large as in city B. We compute the ratio of the BGP value of income per effective creative capital unit in city A to its value in city B. Finally, we compute the ratio of the BGP value of skills per effective creative capital unit in city A to its value in city B.

• Item Type: MPRA Paper
• Language: English
• Keywords: Creative Capital, Creative Class, Economic Growth, Skills, Smart City
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

References

Acemoglu, D. 2009. Introduction to Modern Economic Growth. Princeton University Press, Princeton, NJ.

Andersen, K.V., H.K. Hansen, A. Isaksen, and M. Raunio. 2010. Nordic city regions in the creative class debate—putting the creative class thesis to a test. Industry and Innovation 17: 215-240.

Anonymous. 2017. Study finds 75% of U.S. consumers believe smart cities will positively impact their lives, when educated on the benefits, BusinessWire, http://www.businesswire.com/news/home/20171003005446/en/Study-Finds-75-U.S.-Consumers-Smart-Cities accessed on 19 December 2017

Arribas-Bel, D., Kourtit, K., and Nijkamp, P. 2016. The sociocultural sources of urban buzz, Environment and Planning C, 34, 188-204.

Arthur, W.B. 1989. Competing technologies, increasing returns, and lock-in by historical events, Economic Journal, 99, 116-131.

Bakici, T., Almirall, E., and Wareham, J. 2013. A smart city initiative: The case of Barcelona, Journal of the Knowledge Economy, 4, 135-148.

Barro, R.J., and Sala-i-Martin, X. 2004. Economic Growth, 2nd edition. MIT Press, Cambridge, MA.

Batabyal, A.A., and Beladi, H. 2015. The importance of creative capital for economic growth in the presence of learning by doing, Regional Science Policy and Practice, 7, 187-197.

Batabyal, A.A., and Beladi, H. 2016a. The effects of probabilistic innovations on Schumpeterian economic growth in a creative region, Economic Modelling, 53, 224-230.

Batabyal, A.A., and Beladi, H. 2016b. Creative capital accumulation and the advancement of India’s creative economy, Environment and Planning C, 34, 356-363.

Batabyal, A.A., and Nijkamp, P. 2016. Digital technologies, knowledge spillovers, innovation policies, and economic growth in a creative region, Economics of Innovation and New Technology, 25, 470-484.

Boschma, R.A., and Fritsch, M. 2009. Creative class and regional growth: Empirical evidence from several European countries, Economic Geography, 85, 391-423.

Buettner, T., and Janeba, E. 2016. City competition for the creative class, Journal of Cultural Economics, 40, 413-451.

Caragliu, A., Del Bo, C., and Nijkamp, P. 2011. Smart cities in Europe, Journal of Urban Technology, 18, 65-82.

Das, S., Mourmouras, A., and Rangazas, P.C. 2015. Economic Growth and Development. Springer, New York.

DeAngelis, S. 2014. Smart cities require creative people, https://www.enterrasolutions.com/blog/smart-cities-require-creative-people/ accessed on 15 January 2018.

Ersoy, A. 2017. Smart cities as a mechanism towards a broader understanding of infrastructure interdependencies, Regional Studies, Regional Science, 4, 26-31.

Florida, R. 2002. The Rise of the Creative Class. Basic Books, New York, NY.

Florida, R. 2003. Cities and the creative class, City and Community, 2, 3-19.

Florida, R. 2005. The Flight of the Creative Class. Harper Business, New York, NY.

Fu, S. 2007. Smart café cities: Testing human capital externalities in the Boston metropolitan area, Journal of Urban Economics, 61, 86-111.

Griffin, R.C., Montgomery, J.M., and Rister, M.E. 1987. Selecting functional form in production function analysis, Western Journal of Agricultural Economics, 12, 216-227.

Herrschel, T. 2013. Competitiveness and sustainability: Can’t ‘smart city regionalism’ square the circle? Urban Studies, 50, 2332-2348.

Johnson, P.A., and Takeyama, L.N. 2001. Initial conditions and economic growth in the US states, European Economic Review, 45, 919-927.

Kerimoglu, E., and Karahasan, B.C. 2014. Location patterns of creative capital and regional disparities in Spain, Regional and Sectoral Economic Studies, 14, 113-132.

Mankiw, N.G., Romer, D., and Weil, D.N. 1992. A contribution to the empirics of economic growth, Quarterly Journal of Economics, 107, 407-437.

Marlet, G., and Van Woerkens, C. 2007. The Dutch creative class and how it fosters urban employment growth, Urban Studies, 44, 608-630.

Marrocu, E., and Paci, R. 2012. Education or creativity? What matters most for economic performance? Economic Geography, 88, 369-401.

McGranahan, D., and T. Wojan. 2007. Recasting the creative class to examine growth processes in rural and urban counties. Regional Studies 41: 197-216.

Millar, J.R. 1997. The importance of initial conditions in economic transitions: An evaluation of economic reform progress in Russia, Journal of Socio-Economics, 26, 359-381.

Mundula, L., and Auci, S. 2016. Smart cities: A policy tool for city efficiency? REAL CORP 2016 Conference Proceedings, Hamburg, Germany.

Paskaleva, K.A. 2009. Enabling the smart city: The progress of city e-commerce in Europe, International Journal of Innovation and Regional Development, 1, 405-422.

Porter, A., and Batabyal, A.A. 2016. Physical capital mobility, the educational and quality aspects of creative capital, and output production, Regional Science Policy and Practice, 8, 167-175.

Shapiro, J.M. 2006. Smart cities: Quality of life, productivity, and the growth effects of human capital, Review of Economics and Statistics, 88, 324-335.

Steenbruggen, J., Tranos, E., and Nijkamp, P. 2015. Data from mobile phone operators: A tool for smarter cities? Telecommunications Policy, 39, 335-346.

Sudekum, J. 2010. Human capital externalities and growth of high- and low-skilled jobs, Jahrbucher fur Nationalokonomie und Statistik, 230, 92,-114.

Usman, U., and Batabyal, A.A. 2014. Goods production, learning by doing, and growth in a region with creative and physical capital, International Review of Economics and Finance, 33, 92-99.

Viitanen, J., and Kingston, R. 2014. Smart cities and green growth: Outsourcing democratic and environmental resilience to the global technology sector, Environment and Planning A, 46, 803-819.

Winters, J.V. 2011. Why are smart cities growing? Who moves and who stays, Journal of Regional Science, 51, 253-270.

Zygiaris, S. 2013. Smart city reference model: Assisting planners to conceptualize the building of smart city innovation ecosystems, Journal of the Knowledge Economy, 4, 217-231.