Market Access, Spatial Inequality, and General Purpose Technologies

We study the interplay between the spatial distribution of economic activity and technological progress in the context of general purpose technologies with emphasis on market access. A tractable spatial equilibrium model is developed, in which ex-ante identical cities sort themselves into different technology generations through the interaction between migration, firms’ technology choice, and technological progress. Spatial inequality encourages technological progress, while the reverse causality has inverted-U-shaped effects. The interplay exhibits cross-city divergence and possibly convergence with/without persistent expansion of top cities, where convergence can limit technological progress and diffusion, and thus convergence itself, due to adjustment costs of technology adoption.