Urban Density and the Rate of Invention

August 2006

WP 06-14 – Economists, beginning with Alfred Marshall, have studied the significance of cities in the production and exploitation of information externalities that, today, we call knowledge spillovers. This paper presents robust evidence of those effects.

Supersedes Working Paper 04-16/R – Matching and Learning in Cities: Urban Density and the Rate of Invention

We show that patent intensity — the per capita invention rate — is positively related to the density of employment in the highly urbanized portion of MAs. All else equal, a city with twice the employment density (jobs per square mile) of another city will exhibit a patent intensity (patents per capita) that is 20 percent higher. Patent intensity is maximized at an employment density of about 2,200 jobs per square mile. A city with a more competitive market structure or one that is not too large (a population less than 1 million) will also have a higher patent intensity. These findings confirm the widely held view that the nation’s densest locations play an important role in creating the flow of ideas that generate innovation and growth.

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