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http://papers.nber.org/papers/W8450
The Economic Geography of the Internet Age
Edward E. Leamer, Michael Storper
NBER Working Paper No. W8450
Issued in August 2001
This paper combines the perspective of an international economist with that
of an economic geographer to reflect on how and to what extent the Internet
will affect the location of economic activity. Even after the very
substantial transportation and communication improvements during the 20th
Century, most exchanges of physical goods continue to take place within
geographically-limited 'neighborhoods.' Previous rounds of infrastructure
improvement always have had a double effect, permitting dispersion of
certain routine activities but also increasing the complexity and
time-dependence of productive activity, and thus making agglomeration more
important. We argue that the Internet will produce more of the same forces
for deagglomeration, but offsetting and possibly stronger tendencies toward
agglomeration. Increasingly the economy is dependent on the transmission of
complex uncodifiable messages, which require understanding and trust that
historically have come from .face-to-face contact. This is not likely to be
affected by the Internet, which allows long distance 'conversations' but not
'handshakes.'
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Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326 FAX: 703-993-2323
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