Knowledge economy

Cities, Jobs and the Knowledge Economy

We argue for a move away from the neo-classical economics framework which dominates policy-making, towards consideration of market failures and the importance of planning.

Professor David Soskice

III Research theme from 2019 to 2022 led by Professor David Soskice.
The information technology revolution has led to huge changes in society, reshaping social relationships, the type of work we do and patterns of consumption.  Knowledge-based services account for an increasing proportion of the global economy, in which knowledge and skills are both productive inputs and tradeable services.  In this changing economy many countries have seen a decline in mid-skill, mid-wage jobs, with polarisation between high skill, high pay employment and low skill, low pay (and often precarious) work.  There is an increasing divide between the experiences and prospects of those who enter the labour market as university graduates and those who do not, particularly sharp in low income countries with large informal labour markets.  


One striking feature of this new knowledge-biased labour market is its greater tendency to concentrate economic prosperity in selected locations. In high income countries the loss of industrial employment has been a feature of all major cities and towns, but the knowledge-based service economy has flourished in only a small number of these places. Other once-thriving urban areas are ‘left behind’, struggling to replace their historical economic purpose. As concentrations of skilled workers and high-wage industries in prosperous cities increasingly become the driver of national economic prosperity, geographic divides in education, employment opportunities, political attitudes and cultural values have been thrown into sharp relief. Discontent with this uneven geography of opportunity is manifest in the rise of populist politics across Europe and the United States, challenging the stability of democratic societies.

Our research theme ties together LSE academics who are interested in developing an internationally comparative, cross-disciplinary and multidimensional approach to these issues. We argue for a move away from the neo-classical economics framework which dominates policy-making, towards consideration of market failures and the importance of planning.  Other strands will investigate the institutional responses to technological change, such as the failure of education systems to meet the increased demand for high skilled labour and sub-optimal investment in research and development. We will engage quantitative and qualitative researchers to understand both broad economic processes and everyday lived experiences. 

The theme is organised around four core problems:

1. First is the problem of managing the increasingly unequal aggregate demand between local labour markets that results in high unemployment areas and wage inequality. Central governments have policies to manage the national economy, but what can help poorer cities and towns?  

2. Second is strengthening the link between increased aggregate demand and quality employment. Some of our fastest-growing, most ‘successful’ cities also contain the most precarious and poorest workers. How do ‘good’ jobs get created, and how can labour market inequalities between men and women or across ethnic groups be reduced?  

3. Third, how can successful, growing urban areas rigorously ensure a strong link between economic growth and individual human welfare? This will include investigating the relational aspects and lived experience of inequality in urban areas, and the relationship between inequalities and social mobility.  

4. Finally the younger workforce in advanced economies, as implied above, is increasingly divided between graduates and non-graduates, with something like 50% of young people going through higher education. As AI and associated new technologies develop, graduates are increasingly favoured in labour markets over those with lower education levels. Moreover, graduate education is strongly biased towards those from relatively more privileged backgrounds. Two central questions are therefore how to increase the supply of graduate education, especially for those from more disadvantaged backgrounds; and how to develop the graduate jobs to meet this increased supply. For the next decades these will be central issues determining the shape of society.


Professor David Soskice's latest books: