Dr. Yang Jiao, Fudan University

abstract: We investigate the role of information and communications technology (ICT) in shaping the spatial distribution of skills in the US, through the lens of cross-city joint production (e.g., sourcing, headquarter-subsidiary relation). Motivated by the stylized facts that big cities had become disproportionately more skill-intensive over the period of 1980 to 2013, and industries that are more likely to fragment had seen a larger increase in spatial skill dispersion during the same period, we propose a quantifiable spatial equilibrium model with fragmented cross-city production and heterogeneous skills. The model echoes that a nationwide communications cost reduction, through improvement in ICT, leads to skill reallocation into big cities due to the increase in crosscity joint productions. Consistent with model predictions, we find empirically—using a novel instrumentation strategy—that local Internet quality improvement in large cities leads to skill inflows; while in small cities, it leads to skill outflows. Our quantitative evaluation of the model shows that the improvement in Internet infrastructure accounts for a significant share of the spatial redistribution of skills across US cities.