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Review of Economics and Statistics

Making a Market: Infrastructure, Integration and the Rise of Innovation

Journal Article
Andersson, David, Thor Berger and Erik Prawitz (forthcoming). “Making a Market: Infrastructure, Integration and the Rise of Innovation”. Review of Economics and Statistics.

David Andersson, Thor Berger, Erik Prawitz

We exploit exogenous variation arising from the historical rollout of the Swedish railroad network across municipalities to identify the impacts of improved transport infrastructure on innovative activity. A network connection led to a local surge in patenting due to an increased entry and productivity of inventors. As the railroad network expanded, inventors in connected areas began to develop ideas with applications outside the local economy, which were subsequently sold to firms along the network. Our findings suggest that reductions in communication and transportation costs were an important driver of the historical emergence of a market for ideas.