From Neighborhoods to Nations: The Economics of Social Interactions

Cities exist because proximity facilitates inter-actions between economic agents. There are few, if any, fundamental issues in urban economics that do not hinge in some way on reciprocal action or influence between or among workers and firms. Thus, the localiza-tion of industry arises from intra-industry knowledge spillovers in Marshall (1890), while the transmission of ideas arises through local inter-industry interaction that fosters innovation in Jacobs (1969). In fact, the face-to-face interactions that Jacobs emphasizes are believed to be so critical to cities that Gaspar and Glaeser (1997) (and others) have asked whether advances in communication and in-formation technology might make cities obso-lete. While there is broad agreement that nonmarket interactions are essential to cities and important for economic performance more broadly, the mechanisms through which local interactions generate external effects are not well understood. To better understand these issues, this book brings together the urban economics and the social interactions literature both from a theoretical and empirical perspective. Despite the fundamental importance of the underlying questions, this book is a lone star in the literature. It has no equivalent. There are some books dealing with urban economics and economic geography (Fujita, 1989; Zenou, 2009; Fujita and Thisse, 2013), others with social/network economics (Goyal, 2007;