Ep. 38: Growth by proximity

AEA Research Highlights

Austin was a laid-back college town in the 1980s when a student at the University of Texas named Michael Dell began selling computers from his dorm room.

At the time, Texas’s capital city was perhaps known more for high hats than high-tech. But the company Dell started would become the world’s largest PC maker and attracted a slew of talent that turned Austin into a technology hub.

Enrico Moretti has studied how these “agglomeration economies” develop and the ways they drive growth. In a paper in the American Economic Review, he says that inventors produce more patented research when surrounded by other top talent in their field.

He also says that tech clusters will continue to thrive after the pandemic, despite speculation that they will be less relevant in a world of more remote work.

Moretti spoke with Chris Fleisher about agglomeration and what the case study of Kodak in Rochester, New York, can tell us about how clusters affect innovation.