Technological Waves and Local Growth

Abstract

We develop a spatial model of economic growth to study the effect of changes in the technological landscape on the spatial distribution of economic activity. In the model, innovation via frictional idea diffusion makes cities’ growth trajectories sensitive to “technological waves,” defined as long-term shifts in the importance of different knowledge fields. We calibrate the model using a new dataset of historical geolocated patents, and find that cities’ differential exposure to technological waves explains 15%-20% of the variation in local population growth in the United States over the twentieth century. Counterfactual experiments suggest large geographical effects of future technological scenarios.