Birds of a Feather - Better Together? Exploring the Optimal Spatial Distribution of Ethnic Inventors from a Knowledge Flows Perspective

We develop the knowledge flow production function (KFPF) as a flexible tool for modeling access to knowledge by individuals and economies. We focus on how knowledge flows are affected by the spatial and ethnic proximity of inventors, paying particular attention to how the two forms of proximity interact. In the context of three simple models, we show how the optimal spatial concentration for a city, a nation, and an inventor depends on whether co-location and co-ethnicity are complements or substitutes in facilitating knowledge flows. We then use patent citation data to estimate the key KFPF parameters. We find that both co-location and co-ethnicity do predict knowledge flows in our sample but that the marginal benefit of co-location is significantly less for co-ethnic inventors. Through the lens of our models, these results imply that a dispersed ethnic population is optimal from the perspectives of the city and the economy, in contrast to what is optimal for the ethnic inventor. Spatial concentration is the only stable equilibrium. JEL classification: Z13, O33, R12