Richard Florida's Creative Capital in a Trading Regional Economy: A Theoretical Investigation

RIT Economics Department Working Paper No. 08-08

19 Pages Posted: 27 Jul 2008

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: July 25, 2008

Abstract

We first construct a theoretical model of a regional economy with two sectors. One sector uses physical and creative capital - in the sense of Richard Florida (2002) - to produce a knowledge good that is traded. The other sector uses physical and social capital to produce a good that is not traded. Second, we provide the first formal analysis of the creative capital accumulation decision faced by individuals in this regional economy and we compute the optimal length of time during which creative capital is accumulated. Next, we determine the relative return to creative capital and we use this return to conduct comparative statics exercises with our model's four parameters. Finally, we show that for a given interest rate, the relative price of the nontraded good is higher in regional economies where more creative capital is accumulated.

Suggested Citation

Batabyal, Amitrajeet A. and Nijkamp, Peter, Richard Florida's Creative Capital in a Trading Regional Economy: A Theoretical Investigation (July 25, 2008). RIT Economics Department Working Paper No. 08-08, Available at SSRN: https://ssrn.com/abstract=1177603 or http://dx.doi.org/10.2139/ssrn.1177603

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology (RIT) - Department of Economics ( email )

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Rochester, NY 14623-5604
United States
585-475-2805 (Phone)
585-475-5777 (Fax)

HOME PAGE: http://people.rit.edu/aabgsh

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446091 (Phone)
+31 20 4445611 (Fax)

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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