Working Paper: NBER ID: w13710
Authors: 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.
Keywords: urban economics; communication technology; innovation; manufacturing; urban decline
JEL Codes: R0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improvements in communication technology (L96) | Decreased costs of production in hinterland (R32) |
| Decline in manufacturing in urban areas (like Detroit) (R11) | Increase in urban income and property values in innovative sectors (like New York) (O39) |
| Increased returns to innovation in urban areas due to better communication (O39) | Growth of the innovative sector (O35) |
| Improvements in transportation and communication technology (L96) | Decline in manufacturing cities like Detroit (O14) |
| Improvements in transportation and communication technology (L96) | Increase in returns to innovation in cities like New York (O39) |
| Decline in traditional manufacturing sectors in cities like Cleveland and Detroit (O14) | Rise of idea-oriented industries in cities like New York and Boston (O14) |