The 'Knowledge-City' and the 'Experience-City': The Main and Mediating Effects of Education on Income and Economic Inequality

Purpose - To analyse the alternative roles of education in income and economic inequality in the Knowledge-cities and Experience-cities. Design/methodology/approach - The partial least squares (PLS) method was utilized to estimate and test two competing models that investigate the direct and mediating effects of education on income and inequality in urban areas in the US. Originality/value - The studied models seem to explain more variability in household income than in economic inequality, with the major role being played primarily by the knowledge-based sector, and secondly by education, while suggesting that the experience-based sector is playing a secondary or complementary role at best. Education seems to have both a main and mediating role in household income, as well as in inequality. The knowledge-based sector seems to have both a main and mediating role in household income, and main effect in inequality. The positive effect of size on income is supporting earlier research but the negative effect on inequality is somewhat surprising. The competitive housing market has a positive effect on inequality and is supporting earlier research as well. Practical implications - Education seems to be both an attractor, as well as a mediator for the role a knowledge-based sector plays in urban income and economic inequality. As mediator, its role is intriguing, especially in regard to inequality. The study's findings suggest that education might have a bigger contribution in regions that have relatively less knowledge and/or are less experience intensive.