Information Technology and the Future of Cities
NBER Working Paper No. 5562
Will improvements in information technology eliminate face-to- face interactions and make cities obsolete? In this paper, we present a model where individuals make contacts and choose whether to use electronic or face-to-face meetings in their interactions. Cities are modeled as a means of reducing the fixed travel costs involved in face-to-face interactions. When telecommunications technology improves, there are two opposing effects on cities and face-to-face interactions: some relationships that used to be face-to-face will be done electronically (an intuitive substitution effect), and some individuals will choose to make more contacts, many of which result in face-to-face interactions. Our empirical work suggests that telecommunications may be a complement, or at least not a strong substitute for cities and face-to-face interactions. We also present simple models of learning in person, from a written source, or over the phone, and find that interactive communication dominates other forms of learning when ideas are complicated.
Published: Journal of Urban Economics, Vol. 43, no. 1 (January 1998): 136-156