Monday, December 21, 2009


Tim Harford discusses the issue of aggregation or the phenomenon of clustering of economic specialisation.

Recall the four possible hypotheses: knowledge spreads within industries; ideas are generated when different industries rub together; people learn from being around lots of smart people; or people benefit from the density of a labour market, which helps them find the perfect job.

There is evidence that all four have an effect. Even with the development of modern communications, it still seems that place matters.

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