Arnold Kling  

The Internet Boom, Location, and Income Distribution

The Saddest Sentence I've Read... The Birth Order Illusion...

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.

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CATEGORIES: Income Distribution

COMMENTS (2 to date)
Steve Sailer writes:

As they say, it's not what you know, it's who you know. (More specifically, in a lot of careers, what-you-know must be up to some minimum level to be in the game at all, but who-you-know largely determines how far you will go.)

And by "know," people mean know face to face.

And especially know in pleasant, informal situations. Wal-Mart, for example, forbids salesmen from its suppliers to take its buyers out to lunch. All in-person contacct between suppliers and buyers in Bentonville must take place in the special Lubyanka-like interrogation (excuse me, negotionation) cells within the massive Wal-Mart headquarters. The purpose is precisely to discourage Wal-Mart decision makers from developing any positive subjective feelings toward individuals at supplier companies. But very few companies are anywhere near as ruthless as Wal-Mart is.

liberty writes:

There were many that succeeded outside of the core hot spots of the dot com boom, and many more in the hot spots who failed; but the hot spots existed because the early success stories attracted others so that they could effectively network and utilize each others resources, ideas, partnerships, clients and workers. There were a lot of inter-company contracts and sharing. It wasn't usually "right place right time" as much as learning of an opportunity and grabbing it - by moving or opening a company in the hot spot as fast as possible.

It is now much more possible to succeed without being in the right place - especially since *after* the internet revolution. But it still is very useful to be in a hot spot for your field - consider DC for economists and politicians.

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