The Impact of Transportation Cost on Inventor Mobility and Knowledge Spillovers

Abstract

We contribute to the understanding of the microfoundations of regional competitive advantage by investigating the flows of human capital and knowledge when the transportation costs across regions are reduced by newly launched airline routes. We construct a dataset of interregional flows of human capital and knowledge between dyads of 362 U.S. mainland MSAs using the U.S. patent and inventor data to the U.S. airline data, from 1990 to 2014. To minimize the endogeneity concerns, we used two-stage linear squares (2SLS) estimation. The results show that the regions experience lower outmigration of inventors and are more active in technological innovation (e.g., the number of patents, the number of patenting firms). However, once we classify the regions as “core” or “periphery” on the basis of their patenting activities, we find that the technologically advanced core gains from lower transportation costs more than the technologically lagging periphery, which is in line with the agglomeration mechanism.