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Is distance dying at last? Falling home bias in fixed effects models of patent citations

  • Rachel Griffith


    (Institute for Fiscal Studies and IFS and Manchester)

  • Sokbae Lee


    (Institute for Fiscal Studies and cemmap and SNU)

  • John Van Reenen

    (Institute for Fiscal Studies)

We examine the "home bias" of knowledge spillovers (the idea that knowledge spreads more slowly over international boundaries than within them) as measured by the speed of patent citations. We present econometric evidence that the geographical localization of knowledge spillovers has fallen over time, as we would expect from the dramatic fall in communication and travel costs. Our proposed estimator controls for correlated fixed effects and censoring in duration models and we apply it to data on over two million patent citations between 1975 and 1999. Home bias is exaggerated in models that do not control for fixed effects. The fall in home bias over time is weaker for the pharmaceuticals and information/communication technology sectors where agglomeration externalities may remain strong.

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Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP18/11.

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Date of creation: May 2011
Date of revision:
Handle: RePEc:ifs:cemmap:18/11
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