Working Paper: CEPR ID: DP17323
Authors: W. Walker Hanlon; Stephan Heblich; Ferdinando Monte; Martin Schmitz
Abstract: How do communication costs affect the production of newideas and inventions? To answer this question, we study the introduction of the Uniform Penny Post in Great Britain in 1840. This reform replaced the previous system of expensive distance-based postage fees with a uniform low rate of one penny for sending letters anywhere in the country. The result was a large spatially-varied reduction in the cost of communicating across locations. We study the impact of this reform on the production of scientific knowledge using citation links constructed from a leading academic journal, the Philosophical Transactions, and the impact on the development of new technology using patent data. Our results provide quantitative causal estimates showing how a fall in communication costs can increase the rate at which scientific knowledge is exchanged and new ideas and technologies are developed. This evidence lends direct empirical support to an extensive theoretical literature in economic growth and urban economics positing that more ideas can emerge from communication between individuals.
Keywords: communication; innovation; knowledge flows; penny black stamp
JEL Codes: R1; N9; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduction in communication costs (L96) | Increase in scientific knowledge flows (O36) |
| Reduction in communication costs (L96) | Increase in patent filings (O34) |
| Introduction of the penny post (L87) | Reduction in communication costs (L96) |
| Increase in scientific knowledge flows (O36) | Increase in technological innovations (O39) |
| Reduction in communication costs (L96) | Increase in rate of scientific citations (A14) |
| Locations with greater reduction in postage costs (L87) | Substantial increase in citations (A14) |