On the Dynamics of Growth and Poverty in CitiesAbstractThis article presents a model of the city as a growing, small, open economy in which the uneven distribution of technical knowledge and skills—primarily acquired through formal education—across population subgroups interacts with the growth of business facilities (factories and associated production facilities) to drive the dynamics of population and employment. The urban economy is modelled as a system in which long-term capital flows are strongly influenced by relative after-tax rates of return on capital between the local economy and the "outside" world. Further, the division of the urban population into a skilled middle class and a largely unemployable underclass is the consequence of two forces: educational failure and middle class flight from the city. The educational underclass is a result of a meritocratic educational system that divides each student cohort into a skilled middle class and an underclass bereft of the skills required for legitimate employment. The presence of an educational underclass creates a number of problems for both middle class residents and city authorities that may induce a portion of the middle class to leave the city, thereby worsening the problems associated with poverty. Poverty concentrated in the city increases the costs associated with public services, driving up taxes, reducing city services, and generally worsening the business climate. This, in turn, reduces the long-term, after-tax rate of profit from capital accumulation in the city.On the Dynamics of Growth and Poverty in Cities (*.pdf, 56 KB)
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