Did the internet prevent all invention from moving to one place?
Chris Forman, Avi Goldfarb, Shane Greenstein 23 May 2014
The diffusion of the internet has had varying effects on the location of economic activity, leading to both increases and decreases in geographic concentration. This column presents evidence that the internet worked against increasing concentration in invention. This relationship is particularly strong for inventions with more than one inventor, and when inventors live in different cities.
Reading the technology press, it often seems as if the media think all high-tech invention happens in Silicon Valley. This parochial viewpoint highlights the ‘agglomeration’ advantages that the Valley provides to inventors because so many technology firms are located in the same place. These advantages include easier access to funding from local venture capitalists, sharing of fixed costs such as specialised patent lawyers, and easier exchange of ideas between researchers.
Frontiers of economic research Productivity and Innovation
patents, information technology, technology, agglomeration, internet, economic geography, invention
Who benefits from state corporate tax cuts? A local labour markets approach with heterogeneous firms
Owen Zidar 13 December 2013
Policymakers often use local corporate tax and other policies to induce businesses to locate in their jurisdictions. This column describes new evidence on the effect of state tax cuts on business location and provides a new framework for evaluating the welfare effects of these policies. Contrary to the conventional view of many policymakers and economists, the results suggest that firm owners bear a substantial portion of the incidence of state corporate tax changes.
State and local governments have been increasing business location incentives and cutting corporate taxes to attract businesses to their jurisdictions. For instance, Jay Inslee, the Gov. of Washington, recently passed a $9 billion corporate tax package for Boeing to retain its manufacturing base near Seattle. It is the largest corporate tax break any state has ever granted a company.
taxation, economic geography
Why high-income places manufacture high-quality products
Jonathan Dingel 21 December 2013
Rich nations tend to specialise in manufacturing high-quality products – an achievement that many emerging markets are eager to imitate. But high-quality specialisation could stem either from proximity to high-income consumers, or proximity to high-skill labour. This column discusses research that quantifies the contributions of these two mechanisms by looking at quality-specialisation across US cities. Plant-level data shows that proximity to consumers matters at least as much as differences in plants’ workforces.
The well-known Linder hypothesis (1961) posits that profitably exporting a product requires robust demand for that product in the exporter's home market. Since higher-income consumers tend to purchase higher-quality products, Linder conjectured that demand by local consumers causes high-income countries to produce and export high-quality products. In contrast, the canonical factor-abundance theory of comparative advantage argues that high-income countries’ greater supply of capital and skills is the reason why they export high-quality products.
trade, economic geography, quality specialisation
Distance frictions and firm border effects in knowledge creation: Evidence from Japanese patent data
Hiroyasu Inoue, Kentaro Nakajima, Yukiko Umeno Saito 25 October 2013
Distance matters – in trade, and in knowledge creation. Policies encouraging industrial clustering rely on this notion. This column presents evidence that geographic distance is a significant impediment to inter-establishment research relationships in Japan. This friction persists over decades, suggesting that advances in communication technology are no substitute for face-to-face interaction.
Since 2001 the Japanese government has been implementing an industrial cluster policy – a set of measures to promote the formation of industrial clusters – in an attempt to promote innovation through the geographical proximity of businesses and thereby improve the nation’s competitiveness in the global market. Such policy is being pursued not only in Japan but also in many countries in Europe.
economic geography, industry clusters
Anaemia, exuberance, and vulnerability: A post–financial crisis new global economic geography
Ernesto Talvi, Ignacio Munyo 27 October 2011
The global crisis crippled advanced economies, but it also freed up financial resources that flooded emerging markets. This column introduces an index to identify the post-crisis winners and losers, digging into the causes of the new economic geography and exploring the vulnerability of emerging economies to a recurrence of a Lehman-type virus.
It would not be an overstatement to assert that the global financial crisis has created a ‘new global economic geography’, a new reality that responds to the remarkable fact that the crisis that has crippled advanced economies has also left winners around the globe.
Global governance International finance
G20, global crisis, economic geography
You can raise productivity through R&D, but geography matters a lot
Sergey Lychagin, John Van Reenen, Margaret E Slade, Joris Pinkse 25 October 2010
Why do local policymakers fight so hard to attract research and development labs to their area? This column provides a possible explanation. Using patent data, it finds a strong link between R&D and growth caused by knowledge spillovers between firms.
President Obama recently proposed increasing the generosity of the US research and development (R&D) tax credit system and making it a permanent feature of the US tax code. This was justified by the idea that more R&D would lead to growth, not just worldwide but particularly in the US.
But such a bold statement raises some fundamental questions:
Productivity and Innovation
productivity and innovation, innovation, agglomeration, economic geography, research and development
Paul Krugman's winning of the Nobel Prize in economics – Contributions to international trade theory
Jota Ishikawa 31 January 2009
This column reflects on the Nobel Prize awarded to Paul Krugman, whose solo win surprised some. It comments on the relevance of Krugman’s contributions to new trade theory and new economic geography. The latter have been of particular interest to European economists.
"Kita--!" ("It's here!" or "It's finally come!")
Nobel Prize, economic geography, Paul Krugman, new trade theory
Is the new economic geography passé?
Marius Brülhart 07 January 2009
Paul Krugman suggests that his Nobel-prize-winning “core-periphery” model was perhaps more relevant a century ago than today. This appears to be true in terms of overall manufacturing concentrations in Europe and North America, which are unravelling. Large-scale agglomeration forces, however, are alive and well in the developing world, as are localised sectoral clustering phenomena in industrialised countries.
In his Nobel Prize lecture on December 8, Paul Krugman argued that his core-periphery model of economic geography is in some sense becoming obsolete. It is not true that “the latest wrinkle in theory must be the latest wrinkle in the way the world works”, he pointed out, and he went on to speculate that “the world is becoming less new geography and more classical”.
Development Productivity and Innovation
clusters, urbanisation, agglomeration, economic geography
Long-run spatial inequality in France: Evolution and determinants
Pierre-Philippe Combes, Miren Lafourcade, Jacques-François Thisse, Jean-Claude Toutain 05 December 2008
This column traces the economic evolution of France’s regions over the last 140 years to test the predictions of new economy geography. Both manufacturing and services experienced a bell-shaped curve of spatial development, in which spatial concentration initially increased and then decreased. While transport costs played a key role, positive spillovers are an increasingly important source of agglomeration gains.
This is a very special year for economic geography.
Europe's nations and regions Productivity and Innovation
France, agglomeration, economic geography, spatial inequality