The Internet Boom, Location, and Income Distribution
By Arnold Kling
Hal Varian reports on research by Jamie Galbraith and Travis Hale.
According to Mr. Galbraith and Mr. Hale, much of the increase in income inequality in the late 1990’s resulted from large income changes in just a handful of locations around the country — precisely those areas that were heavily involved in the information technology boom.
…the biggest point that I take away is a simple one: there’s no substitute for being in the right place at the right time.
The full paper is here.
What is odd about this is that the phenomenon driving this geographic disparity was the Internet. Think about that. I started my Internet business in 1994, and I would say that I was in the right place at the right time. But I worked out of a one-person office in Silver Spring, Maryland, in part on the premise that location does not matter. The business took off when I found partners in Scottsdale, Arizona, and we remained in separate locations. In recent years, offshore outsourcing made headlines, again resting on the premise that location does not matter.
It seems obvious to the authors how the Internet boom could have caused high geographic concentration of income. To me, it seems almost paradoxical.