NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Birds of a Feather - Better Together? Exploring the Optimal Spatial Distribution of Ethnic Inventors

Ajay Agrawal, Devesh Kapur, John McHale

NBER Working Paper No. 12823
Issued in January 2007
NBER Program(s):   PR

We examine how the spatial and social proximity of inventors affects knowledge flows, focusing especially on how the two forms of proximity interact. We develop a knowledge flow production function (KFPF) as a flexible tool for modeling access to knowledge and show that the optimal spatial concentration of socially proximate inventors in a city or nation depends on whether spatial and social proximity are complements or substitutes in facilitating knowledge flows. We employ patent citation data, using same-MSA and co-ethnicity as proxies for spatial and social proximity, respectively, to estimate the key KFPF parameters. Although co-location and co-ethnicity both predict knowledge flows, the marginal benefit of co-location is significantly less for co-ethnic inventors. These results imply that dispersion of socially proximate individuals is optimal from the perspectives of the city and the economy. In contrast, for socially proximate individuals themselves, spatial concentration is preferred - and the only stable equilibrium.

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Document Object Identifier (DOI): 10.3386/w12823

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