Industry localization, distance decay, and knowledge spillovers: Following the patent paper trail

Octávio Figueiredo, Paulo Guimaraes and Douglas Woodward ()

Journal of Urban Economics, 2015, vol. 89, issue C, 21-31

Abstract: This paper investigates Alfred Marshall’s hypothesis that knowledge spillovers increase where industries are localized. At the same time, we take a fresh look at the role of distance in the diffusion of knowledge spillovers. Relying on a cited-citing gravity-like equation with high-dimensional fixed effects that control for multiple sources of observed and non-observed heterogeneity, we implement a Poisson pseudo-maximum-likelihood (PPML) estimator. We find that knowledge spillovers correlate positively with industry localization and that the agglomeration of an industry can offset the adverse effect of distance. The results also corroborate the distance decay effect uncovered in earlier research. Our new approach to estimate the PPML with two high-dimensional fixed effects should prove valuable in applications to a variety of other problems in economics, such as the estimation of gravity equations widely used in modeling migration, trade and other flows among countries and regions.

Keywords: Knowledge spillovers; Agglomeration; Distance decay; Gravity equation; Poisson regression; High-dimensional fixed effects (search for similar items in EconPapers)
JEL-codes: C13 C21 R12 R39 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Working Paper: Industry Localization, Distance Decay, and Knowledge Spillovers: Following the Patent Paper Trail (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:89:y:2015:i:c:p:21-31

DOI: 10.1016/j.jue.2015.06.003

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