Abstract
We estimate a knowledge flow production function using patent data associated with U.S. inventors of Indian origin. Our results suggest that co-location and co-ethnicity substitute for rather than complement one another in terms of facilitating knowledge flows. Our model shows this is a sufficient condition for: 1) diversity to be optimal for a city and 2) a dispersed diaspora to be optimal for the economy. However, for dispersion to be optimal for the diaspora itself and for the dispersed equilibrium to be stable the negative interaction effect must outweigh the co-location effect; our results indicate this is not the case.
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