This paper formalizes one mechanism through which diversification in the production of research & development across firms located in a city dampens volatility in the local labor market, improves the incentives to perform research & development and smooths the aggregate business cycle...

In his seminal paper, Lucas (1988) stresses the important role of human capital externalities in explaining long-term economic growth and points out two major determinants of human capital externalities: average human capital level and group interactions. Existing literature has well documented...