Did the Death of Distance Hurt Detroit and Help New York?
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.
We are grateful to Diego Puga and participants at the NBER Economics of Agglomeration Conference for helpful comments. Glaeser thanks the Taubman Center for State and Local Government and Ponzetto thanks the Institute for Humane Studies for financial assistance. Kristina Tobio and Scott Kominers provided superb research assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Did the Death of Distance Hurt Detroit and Help New York?, Edward L. Glaeser, Giacomo A. M. Ponzetto. in Agglomeration Economics, Glaeser. 2010