17 August 2016

CityLab: The Historic Link Between Cities and Innovation

Cities, with their dense mixtures of people and economic activity, have long been fonts of innovation. To start, density spurs innovation by pushing people and ideas together, enabling them to combine and recombine in new ways. And advances in transportation—from railroads and subways to automobiles, planes, and high-speed rail—increase the circulation not only of goods and people, but of ideas as well. [...]

To get at the connection between cities, transportation, and innovation, Perlman’s study combines several unique data sets. She begins with detailed data on more than 700,000 patents—which she uses as a proxy for innovation—for all U.S. counties from 1790 to 1900. (Patents are the most accessible written records of innovative activity: Even though they are imperfect, economists and social scientists have long used them to study the dynamics of technological change and innovation.) Perlman then compares this to data on the accessibility of canals, railroads, and other forms of transportation; distance to major ports; and the key terms used in patent descriptions, which enable her to examine the effects of local transportation on the speed of innovative activity. [...]

Overall, Perlman finds transportation to be a key determinant of innovation in rapidly industrializing and urbanizing America. But the mechanism by which this occurs is even more interesting—and more important—to our understanding of innovation. Her analysis shows that, though both matter, innovation is not just spurred by population, nor is it merely a function of access to larger markets brought on by transportation. Instead, it has subtler effects. As Perlman explains in an email, “If transportation simply runs through a place, it doesn't do any good unless it also forms a nexus around which agglomerations occur. This is shown in the different effects estimated in the North and the South.”

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