On the Relationship between Innovation and Wage Inequality: New Evidence from Canadian Cities.

In this article, we examine the link between innovation and earnings inequality across Canadian cities over the 1996-2006 period. We do so using a novel data set that combines information from the Canadian long-form census and the United States Patent and Trademark Office. The analysis reveals that there is a positive relationship between innovation and inequality: cities with higher levels of innovation have more unequal distributions of earnings. Other factors influencing differences in inequality include city size, manufacturing and government employment, the percentage of visible minority in an urban population, and educational inequality. These results are robust to the use of different measures of inequality, innovation, alternative specifications, and instrumental variables estimations. Questions are thus raised about how the benefits of innovation are distributed in society and the long-term sustainability of such trends. [ABSTRACT FROM AUTHOR]