Regional Economy, Creative Class, and Social Diversity

Abstract

According to Florida’s theory in his book “The Rise of the Creative Class”, the creative class can improve a regions’ economic growth. In addition, societies with tolerance and diversity attract the creative class. The creative class is made up of nine occupations derived from the Standard Occupational Classification System. However, he did qualitative research in his book without controlling for fixed effects. This may lead to incorrect attribution. Therefore, I test these hypotheses through quantitative methods with fixed effects control for data at both state and metropolitan level. I establish two linear models. One of them aims to test the relationship between economic growth and the number of the creative class. The other aims to test the relationship between the creative class and social diversity. Social diversity is represented by the Gay Index, Innovation Index, Melting Pot Index, and Married Household Proportion.

The regression results indicate that real GDP per capita, the creative class, and social diversity have a significant and positive relationship with each other when not controlling for fixed effects, matching Florida’s theory. However, controlling for fixed effects, I find that the creative class only has a significantly positive relationship with economic growth at the metropolitan level. Therefore, the creative class has an observed relationship with city economic growth but social diversity has no direct relationship with it at either level. On the other hand, well-educated people still act as an important role in economic growth and has a close relationship with the creative class. But we can’t say that the creative class is equal to highly educated people.

From the lagged regression, we can see that the industry plays an important role in improving economic growth. Patents and new technologies attract skilled workers in the creative industry which is the creative class. And then the creative class promotes economic growth. Social diversity seems to have a lagged relationship with the creative class but only at the state level. Therefore, urban governments should implement policies that improve the development of the creative industries and cultivate skilled personnel in these industries.

In future research, researchers can combine the characteristics of different cities to further discuss their fit with different creative industries. We can also focus on how to cultivate and attract the creative class to promote the economic development of the city. In addition, further research can find out what consists of the fixed effects which can explain 30% of the economic growth and creative class.