Businesses Benefit Materially by Locating Near Each Other

May 23rd, 2014
in econ_news

by Jeffrey Lin - Federal Reserve Bank of Philadelphia

Why do firms and inventors tend to locate in dense, costly areas? One intriguing hypothesis is that such geographic clustering lets them benefit from local knowledge spillovers. As nobel laureate Robert Lucas has noted, the benefits of one person’s knowledge spilling over to others play a central role in economic growth and the existence of cities:

What can people be paying Manhattan or downtown Chicago rents for, if not for being near other people?

Follow up:

Proximity may improve the sharing of knowledge, the matching of ideas to firms, or the rate of learning.1 if dense clustering indeed confers these benefits, then that raises the possibility that individuals and firms may not be fully taking them into account when deciding where to locate, resulting in underinvestment in new ideas.

[click on image below to read the entire study]

Source: http://philadelphiafed.org/research-and-data/publications/business-review/2014/q2/brQ214_paper_trail.pdf

Jeffrey Lin is an economic advisor and economist at the Federal Reserve Bank of Philadelphia. The views expressed in this article are not necessarily those of the Federal Reserve. This article and other Philadelphia Fed reports and research are available at www. philadelphiafed.org/research-and-data/publications.









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved