Cities and Ideas

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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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w20921

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