NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Cities and Ideas

Mikko Packalen, Jay Bhattacharya

NBER Working Paper No. 20921
Issued in January 2015
NBER Program(s):Development of the American Economy, Health Care, Health Economics, Productivity, Innovation, and Entrepreneurship

Faster technological progress has long been considered a key potential benefit of agglomeration. Physical proximity to others may help inventors adopt new ideas in their work by increasing awareness about which new ideas exist and by enhancing understanding of the properties and usefulness of new ideas through a vigorous debate on the ideas' merits (Marshall, 1920). We test a key empirical prediction of this theory: that inventions in large cities build on newer ideas than inventions in smaller cities. We analyze the idea inputs of nearly every US patent granted during 1836–2010. We find that a larger city size provided a considerable advantage in inventive activities during most of the 20th century but that in recent decades this advantage has eroded.

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Document Object Identifier (DOI): 10.3386/w20921

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