Urban interactions: soft skills versus specialization

Abstract

This article considers the role of soft skills in cities and industry clusters. It begins by specifying a model of agglomeration economies where soft skills allow agents to interact more productively. The model exposes two conflicting forces: agglomeration allows opportunities to interact, but it also produces thick, specialized markets, and this specialization can be a substitute for interaction. In order to empirically evaluate the soft skills—agglomeration relationship, the article matches data on the interaction requirements of occupations from the Dictionary of Occupational Titles to Census data. The within-industry average level of soft skills is found to be higher in cities but not in industry clusters. Workers at the top of the skill distribution in large cities typically have higher levels of soft skills than in small cities, while the least skilled workers are less skilled in large cities than in small cities. This pattern is reversed for industry clusters.