Is Distance Dying at Last? Falling Home Bias in Fixed Effects Models of Patent Citations
Institute for Fiscal Studies (IFS); University of Manchester; Centre for Economic Policy Research (CEPR)
University College London
John Van Reenen
London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)
NBER Working Paper No. w13338
We examine the home bias of international knowledge spillovers as measured by the speed of patent citations (i.e. knowledge spreads slowly over international boundaries). We present the first compelling econometric evidence that the geographical localization of knowledge spillovers has fallen over time, as we would expect from the dramatic fall in communication and travel costs. Our proposed estimator controls for correlated fixed effects and censoring in duration models and we apply it to data on over two million citations between 1975 and 1999. Home bias declines substantially when we control for fixed effects: there is practically no home bias for the more modern sectors such as pharmaceuticals and information/communication technologies.
Number of Pages in PDF File: 48
Date posted: August 24, 2007
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