The effect of innovation on income inequality in Canadian cities

This research explores the effect of innovation on income inequality in Canadian metropolitan areas from 1991 to 2011. The analysis has been done through regression analyses on the income and employment data obtained from long form Canadian census and National Household Survey micro-data. The results show that the positive correlation between innovation and income inequality in Canadian city-regions grew from 2001 to 2011; however, there was no correlation between them in 1990s. Among three parameters that were used as a measure of innovation in this research (ratio of employment in Knowledge-Intensive Business Services (KIBS), high-tech occupations and high-tech industries), the ratio of employment in KIBS has the most significant effect. Moreover, cities with a high rate of KIBS activities have a higher level of within-industry income inequality, that is, between high-tech occupations and other employees within the same industry.