Industry Localization, Distance Decay, and Knowledge Spillovers: Following the Patent Paper Trail

Octávio Figueiredo, Paulo Guimaraes and Douglas Woodward ()

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper investigates the hypothesis that knowledge spillovers increase where industries are localized. At the same time, we take a fresh look at the role of distance in knowledge diffusion. Our unique database combines U.S. county-level patent citation data with county-level establishment and employment data. Relying on a cited-citing gravity equation with high-dimensional fixed effects that control for multiple sources of observed and non-observed heterogeneity, we implement a Poisson pseudo-maximum-likelihood estimator. Our results confirm the negative role of distance uncovered in Jaffe, Trajtenberg & Henderson's (1993) pioneering work. We also find that knowledge spillovers correlate positively with industry localization and that the agglomeration of an industry can offset the effect of distance. Our approach to estimate the Poisson regression with two high-dimensional fixed effects may prove equally useful in applications to a variety of other problems in economics.

Keywords: Knowledge Spillovers; Agglomeration; Gravity Equation; High-Dimensional Fixed Effects; Poisson Regression. (search for similar items in EconPapers)
JEL-codes: C13 C21 R12 R39 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-01
New Economics Papers: this item is included in nep-cse, nep-geo, nep-ipr, nep-pr~ and nep-ure
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Journal Article: Industry localization, distance decay, and knowledge spillovers: Following the patent paper trail (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:521

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