The Global Economy Is Local

October 13, 2012 in Daily Bulletin

Underpinning the foundation of a globalized world is an economy that has become increasingly local, writes Enrico Moretti:

  • As the world economy has moved towards services and information technology, human capital matters more than physical capital.
  • Unlike physical capital, human capital tends to clump together. Neighbourhoods with a lot of college educated people attract more of the same people, making it unlikely that the best and brightest will distribute themselves across America.
  • This phenomenon isn’t limited to the United States. In India and China relatively small cities are racing ahead, leaving the rest of the country behind.
  • For a company to be successful it must set up shop in places where these talented workers are available. This means that despite the globalized world, companies have to be careful to set up in the right localized area.

Read more of the argument here.

Source: CNN

Via: The Economist