The effect of innovation on income inequality in Canadian cities

Author/s: Hamidreza Bakhtiarizadeh

Creation date: 2016  

Contact info: hrbakhtiar@gmail.com

Senior supervisor: Peter V. Hall

Keywords: innovation, inequality, high-tech, knowledge-intensive business services, economic development, Canada

Geographic focus: Canada

Research question/s: How does innovation affect income inequality in Canadian cities?

Significance

Innovative activities have become an important source of growth in contemporary urban economies and many local governments have therefore taken steps to attract innovative workers and firms. At the same time, inequality is increasingly a pressing concern in urban environments, due to its association with high crime rates and health problems. This research examines the relationship between innovation and income inequality in Canadian urban regions. It may therefore be of interest to local governments who want to attract innovation to their regions, but who are also concerned about inequality. Also, there has been considerable research into the benefits of innovation, but less that investigates possible negative consequences. This project therefore complements previous innovation research and provides a more complete picture of the effects of economic innovation on Canadian urban regions.

Findings

The author conducted regression analyses on samples of income and employment microdata obtained from the long form Canadian census and National Household Survey (1991, 1996, 2001, 2006 and 2011). These analyses showed there was no statistically significant correlation between innovation and income inequality in Canada in the 1990s, but a growing significant positive correlation between those variables from 2001 to 2011. The author looked at three different indicators of innovation (high-tech occupations, high-tech industries and ratio of employment in knowledge-intensive business services, or KIBS) and found that the ratio of employment in KIBS had the most significant effect on income inequality. Also, the author’s analysis showed that within KIBS industries, innovation apparently increases the gap between innovative occupations and other occupations.