Cultural workers and the character of cities

Abstract

This paper examines the location choice of cultural producers when cities differ in housing supply and income demographics. We develop a two-region spatial model containing three types of industries: a constant returns to scale traditional sector, a modern sector with external scale economies and a monopolistically competitive cultural sector. The model is initially analyzed when workers supply labor inelastically to their respective industry. Both integration and segregation are never a stable equilibrium, and the conditions for the stability of both concentrated and partially interior equilibrium are solved for. The model is extended to allow for cultural producers to divide their time between cultural production and moonlighting in the traditional sector, in order to smooth their income. Under this extension, there is an equilibrium where a share of cultural producers live isolated from a larger integrated market. We also identify an equilibrium where one region is able to sustain full-time cultural producers, while in the opposite region cultural producers must moonlight in the traditional sector. Under partially interior equilibria, the number of varieties of the cultural good is always larger in the region with the greater supply of housing.