Proximity and Knowledge Spillovers : Evidence from the Introduction of New Airline Routes

The chicken-and-egg problem between localized knowledge spillovers and thespatial concentration of inventive activities makes it difficult to identify how proximity affects knowledge spillovers. Using sudden changes in travel time following the introduction of new flight routes, we identify that decreasing travel time between metropolitan areas by 20% increases knowledge flow as measured by patent citations by 0.5%. The results are robust to multiple falsification tests. The effects are stronger in pairs of areas with higher absorptive capacity and in rapidly-evolving technological fields. As information technology diffused in the 2000s, travel time mattered less for knowledge diffusion than before