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Did the Death of Distance Hurt Detroit and Help New York?

In: Agglomeration Economics

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  • Edward L. Glaeser
  • Giacomo A. M. Ponzetto

Abstract

Urban proximity can reduce the costs of shipping goods and speed the flow of ideas. Improvements in communication technology might erode these advantages and allow people and firms to decentralize. However, improvements in transportation and communication technology can also increase the returns to new ideas, by allowing those ideas to be used throughout the world. This paper presents a model that illustrates these two rival effects that technological progress can have on cities. We then present some evidence suggesting that the model can help us to understand why the past thirty-five years have been kind to idea-producing places, like New York and Boston, and devastating to goods-producing cities, like Cleveland and Detroit.

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This chapter was published in:

  • Edward L. Glaeser, 2010. "Agglomeration Economics," NBER Books, National Bureau of Economic Research, Inc, number glae08-1, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 7985.

    Handle: RePEc:nbr:nberch:7985

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    1. Christopher R. Berry & Edward L. Glaeser, 2005. "The divergence of human capital levels across cities," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 407-444, 08.
    2. J. Vernon Henderson & Yukako Ono, 2004. "Where do manufacturing firms locate their headquarters?," Working Paper Series WP-04-29, Federal Reserve Bank of Chicago.
    3. Edward L. Glaeser & Albert Saiz, 2003. "The rise of the skilled city," Working Papers 04-2, Federal Reserve Bank of Philadelphia.
    4. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Economics of Governance, Springer, vol. 83(1), pages 197-228, October.
    5. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels across Cities," Harvard Institute of Economic Research Working Papers 2091, Harvard - Institute of Economic Research.
    6. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    7. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
    8. Gilles Duranton & Diego Puga, 2001. "From Sectoral To Functional Urban Specialisation," CEP Discussion Papers dp0511, Centre for Economic Performance, LSE.
    9. Kim, Sukkoo, 1999. "The Rise of Multiunit Firms in U.S. Manufacturing," Explorations in Economic History, Elsevier, vol. 36(4), pages 360-386, October.
    10. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    11. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers.
    12. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    13. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels Across Cities," NBER Working Papers 11617, National Bureau of Economic Research, Inc.
    14. Berry, Christopher R. & Glaeser, Edward L., 2005. "Divergence of Human Capital Levels across Cities," Working Paper Series rwp05-057, Harvard University, John F. Kennedy School of Government.
    15. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
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    Cited by:
    1. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," NBER Working Papers 14373, National Bureau of Economic Research, Inc.
    2. Partridge, Mark D. & Rickman, Dan S. & Ali, Kamar & Olfert, M. Rose, 2009. "Agglomeration spillovers and wage and housing cost gradients across the urban hierarchy," Journal of International Economics, Elsevier, vol. 78(1), pages 126-140, June.
    3. Partridge, Mark D. & Rickman, Dan S. & Ali, Kamar & Olfert, M. Rose, 2010. "Recent spatial growth dynamics in wages and housing costs: Proximity to urban production externalities and consumer amenities," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 440-452, November.
    4. Veronica Guerrieri & Daniel Hartley & Erik Hurst, 2012. "Within-City Variation in Urban Decline: The Case of Detroit," American Economic Review, American Economic Association, vol. 102(3), pages 120-26, May.
    5. Liao, Wen-Chi, 2012. "Inshoring: The geographic fragmentation of production and inequality," Journal of Urban Economics, Elsevier, vol. 72(1), pages 1-16.
    6. Simon Choi & Changkeun Park & JiYoung Park, 2014. "A spatio-temporal analysis of population and employment growth for Southern California," The Annals of Regional Science, Springer, vol. 52(1), pages 19-40, January.
    7. Lööf, Hans & Nabavi, Pardis, 2012. "Increasing Return To Smart Cities," Working Paper Series in Economics and Institutions of Innovation 274, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies, revised 26 Sep 2012.
    8. Lööf, Hans & Nabavi, Pardis, 2013. "Learning and Productivity of Swedish Exporting Firms: The importance of Innovation Efforts and the Geography of Innovation," Working Paper Series in Economics and Institutions of Innovation 296, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    9. Suzanne Kok, 2013. "Returns to Communication in Specialised and Diversified US Cities," CPB Discussion Paper 236, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
    11. Catherine BAUMONT & Rachel GUILLAIN, 2013. "Interactions, Spillovers De Connaissance Et Croissance Des Villes Européennes - Quel Est Le Rôle De La Géographie, Du Climat Institutionnel Et Des Réseaux Des Firmes Multinationales ?," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 38, pages 161-207.
    12. Fu, Shihe & Hong, Junjie, 2008. "Information and communication technologies and geographic concentration of manufacturing industries: evidence from China," MPRA Paper 7446, University Library of Munich, Germany.
    13. Kurt A. Hafner, 2008. "Agglomeration Economies and Clustering – Evidence from German Firms," DEGIT Conference Papers c013_023, DEGIT, Dynamics, Economic Growth, and International Trade.

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