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In Superstar Cities, the Rich Get Richer, and They Get Amazon

“This is a very rational decision for Amazon to make in the micro; in the macro, it reinforces a really challenging trend for the U.S. economy,” mentioned John Lettieri, the president of E.I.G. “The divide between prosperous and distressed regions is growing wider. And it’s because of things like this.”

In earlier financial expansions, E.I.G. has discovered, the advantages had been extra extensively felt, and expansion used to be pushed by way of extra puts, together with rural communities. Today, information issues about the nationwide financial system now not describe neatly what’s going down on the floor in lots of puts.

Part of what has modified is that the American financial system has turn out to be ruled extra by way of firms like Amazon, which produce products and services as an alternative of manufactured merchandise, and thus make use of instrument engineers as an alternative of meeting line employees.

Drop a large Amazon headquarters into Washington or New York, and economists be expecting the 50,000 employees there to be extra productive than if the identical 50,000 jobs had been dropped into Indianapolis. Simply hanging them in New York, close to such a lot of different tech employees, will increase the probability that Amazon invents extra products and services, connects to extra markets, makes more cash.

Those added advantages are so sturdy, economists say, that it’s value it to firms like Amazon to pay extra — a lot extra — for place of business area and worker salaries in New York City.

“If you are in the business of making new things — whether it’s a new product, or a new way of delivering things, or a new service — and it’s something that is unique, and it keeps changing and it needs updating, the most important factor of all is human capital,” mentioned Enrico Moretti, an economist at the University of California, Berkeley. “It’s not like making soap, or like making textiles.”

Mr. Moretti’s newest analysis means that scientists who transfer from small to bigger clusters of mavens produce extra innovations, a trend that performs out ceaselessly in Silicon Valley. Looked at differently, a majority of patents pop out of the greatest metro spaces. If we unfold their inventors lightly throughout the nation, Mr. Moretti mentioned, we’d almost certainly have considerably much less innovation in America.


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