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Geography and the Internet: Is the Internet a Substitute or a Complement for Cities?

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Author Info
Todd Sinai
Joel Waldfogel

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Abstract

We study the tendency to connect to the Internet, and the online and offline shopping behavior of connected persons, to draw inferences about whether the Internet is a substitute or a complement for cities. We document that larger markets have more locally-targeted online content and that individuals are more likely to connect in markets with more local online content, suggesting the Internet is a complement to cities. Yet, holding local online content constant, people are less likely to connect in larger markets, indicating that the Internet is also a substitute for cities. We also find that individuals connect to overcome local isolation: notwithstanding a large digital divide, blacks are more likely to connect, relative to whites, when they comprise a smaller fraction of local population, making the Internet a substitute for agglomeration of preference minorities within cities. Finally, using online and offline spending data, we find that connected persons spend more on books and clothing online, relative to their offline spending, if they are farther from offline stores. This indicates that the Internet functions as a substitute for proximity to retail outlets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10028.

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Date of creation: Oct 2003
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Handle: RePEc:nbr:nberwo:10028

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Find related papers by JEL classification:
R00 - Urban, Rural, and Regional Economics - - General - - - General
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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References listed on IDEAS
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  4. Gaspar, Jess & Glaeser, Edward L., 1998. "Information Technology and the Future of Cities," Journal of Urban Economics, Elsevier, vol. 43(1), pages 136-156, January. [Downloadable!] (restricted)
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  5. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Blackwell Publishing, vol. 43(2), pages 217-35, June. [Downloadable!] (restricted)
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  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  9. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Menzie Chinn & Robert Fairlie, 2004. "The Determinants of the Global Digital Divide: A Cross-Country Analysis of Computer and Internet Penetration," Santa Cruz Center for International Economics, Working Paper Series 1022, Center for International Economics, UC Santa Cruz. [Downloadable!]
    Other versions:
  2. Matthew Gentzkow, 2006. "Valuing New Goods in a Model with Complementarities: Online Newspapers," NBER Working Papers 12562, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June. [Downloadable!]
  4. repec:att:wimass:1920410 is not listed on IDEAS
  5. repec:bep:maccon:v:8:y:2008:i:1:p:1627-1627 is not listed on IDEAS
  6. Anja Lambrecht & Katja Seim, 2006. "Adoption and Usage of Online Services in the Presence of Complementary Offline Services: Retail Banking," Working Papers 06-27, NET Institute, revised Oct 2006. [Downloadable!]
  7. Jesse W.J. Weltevreden & Oedzge A.L.C. Atzema & Koen Frenken & Karlijn de Kruijf & Frank G. van Oort, 2005. "The Geography of Internet Adoption by Retailers," Papers in Evolutionary Economic Geography (PEEG) 0510, Utrecht University, Section of Economic Geography, revised Sep 2005. [Downloadable!]
  8. Steven Berry & Joel Waldfogel, 2003. "Product Quality and Market Size," NBER Working Papers 9675, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Chris Forman & Avi Goldfarb & Shane Greenstein, 2003. "How did Location Affect Adoption of the Commercial Internet? Global Village, Urban Density, and Industry Composition," NBER Working Papers 9979, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Schleife, Katrin, 2008. "Regional Versus Individual Aspects of the Digital Divide in Germany," ZEW Discussion Papers 06-85 [rev.2], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  11. Rainald Borck, 2005. "Social Agglomeration Externalities," Discussion Papers of DIW Berlin 505, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  12. Joel Waldfogel, 2006. "The Median Voter and the Median Consumer: Local Private Goods and Residential Sorting," NBER Working Papers 11972, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Guido De Blasio, 2006. "Does the Internet Kill the Distance? Evidence From Navigation, E-Commerce, and E-Banking," ERSA conference papers ersa06p440, European Regional Science Association. [Downloadable!]
  14. Menzie D. Chinn & Robert W. Fairlie, 2006. "ICT Use in the Developing World: An Analysis of Differences in Computer and Internet Penetration," Working Papers 06-03, NET Institute, revised Sep 2006. [Downloadable!]
    Other versions:
  15. Jordi Pons-Novell & Elisabet Viladecans-Marsal, . "Cities and the internet: The end of distance?," Studies on the Spanish Economy 198, FEDEA. [Downloadable!]
  16. Jed Kolko, 2007. "Urbanization, Agglomeration, and Co-Agglomeration of Service Industries," NBER Chapters, in: The Economics of Agglomeration National Bureau of Economic Research, Inc. [Downloadable!]
  17. Jesse Weltevreden & Karlijn De Kruijf & Oedzge Atzema & Koen Frenken & Frank Van Oort, 2005. "The b2c e-commerce landscape of the Dutch retail sector," ERSA conference papers ersa05p228, European Regional Science Association. [Downloadable!]
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