A simple model of process innovation is proposed, where firms learn about their ideal production process by making prototypes. We build around this a dynamic general equilibrium model, and derive conditions under which diversified and specialised cities coexist. New products are developed in...

Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone, and yet there is little sorting on ability. A possible explanation is that young individuals have an imperfect assessment of their ability, and, when they learn about it, early decisions...

Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone, and yet there is little sorting on ability. A possible explanation is that young individuals have an imperfect assessment of their ability, and, when they learn about it, early decisions...