Geography and the Internet: Is the Internet a Substitute or a Complement for Cities?

37 Pages Posted: 14 Oct 2003 Last revised: 25 Apr 2015

See all articles by Todd M. Sinai

Todd M. Sinai

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management; National Bureau of Economic Research (NBER); University of Minnesota - Twin Cities - Department of Economics

Date Written: October 2003

Abstract

We study the tendency to connect to the Internet, and the online and offline shopping behavior of connected persons, to draw inferences about whether the Internet is a substitute or a complement for cities. We document that larger markets have more locally-targeted online content and that individuals are more likely to connect in markets with more local online content, suggesting the Internet is a complement to cities. Yet, holding local online content constant, people are less likely to connect in larger markets, indicating that the Internet is also a substitute for cities. We also find that individuals connect to overcome local isolation: notwithstanding a large digital divide, blacks are more likely to connect, relative to whites, when they comprise a smaller fraction of local population, making the Internet a substitute for agglomeration of preference minorities within cities. Finally, using online and offline spending data, we find that connected persons spend more on books and clothing online, relative to their offline spending, if they are farther from offline stores. This indicates that the Internet functions as a substitute for proximity to retail outlets.

Suggested Citation

Sinai, Todd M. and Waldfogel, Joel, Geography and the Internet: Is the Internet a Substitute or a Complement for Cities? (October 2003). NBER Working Paper No. w10028, Available at SSRN: https://ssrn.com/abstract=457550

Todd M. Sinai (Contact Author)

University of Pennsylvania - The Wharton School ( email )

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National Bureau of Economic Research (NBER)

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Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management ( email )

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National Bureau of Economic Research (NBER)

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University of Minnesota - Twin Cities - Department of Economics ( email )

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Minneapolis, MN 55455
United States

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