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Networking Off Madison Avenue

J. Vernon Henderson () and Mohammad Arzaghi

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper examines the effect on productivity of having more near advertising agency neighbors and hence better opportunities for meetings and exchange within Manhattan. We will show that there is extremely rapid spatial decay in the benefits of having more near neighbors even in the close quarters of southern Manhattan, a finding that is new to the empirical literature and indicates our understanding of scale externalities is still very limited. The finding indicates that having a high density of commercial establishments is important in enhancing local productivity, an issue in Lucas and Rossi-Hansberg (2002), where within business district spatial decay of spillovers plays a key role. We will argue also that in Manhattan advertising agencies trade-off the higher rent costs of being in bigger clusters nearer “centers of action”, against the lower rent costs of operating on the “fringes” away from high concentrations of other agencies. Introducing the idea of trade-offs immediately suggests heterogeneity is involved. We will show that higher quality agencies are the ones willing to pay more rent to locate in greater size clusters, specifically because they benefit more from networking. While all this is an exploration of neighborhood and networking externalities, the findings relate to the economic anatomy of large metro areas like New Yorkthe nature of their buzz.

Keywords: Advertising; Agglomeration; Business Services; Discrete Choice; Knowledge Spillovers; Learning; Location Decision; Poisson Regression; Nested Logit (search for similar items in EconPapers)
JEL-codes: D82 D83 D85 L25 L84 M37 R12 R30 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2005-10
New Economics Papers: this item is included in nep-dcm, nep-mkt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (79) Track citations by RSS feed

Downloads: (external link) First version, 2005 (application/pdf)

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Journal Article: Networking off Madison Avenue (2008) Downloads
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