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Grandma and the City

Jan 31, 2011 • Developing Economies, Economic Thinkers, Households, Innovation, Regulation • 101 Views    No Comments

In the U.S. 81% of us live in a city. Saying that cities generate more wealth, productivity and innovation, Brookings’ Research Director Alan Berube and Harvard’s Edward Glaeser applaud urbanization.

In China, though, Grandma might not be so happy. More urbanization means less family cohesion. Offspring leave the farm for the city and leave parents and grandparents behind. Imagine this, though. China’s Civil Affairs Ministry is considering making adult children visit their parents. According to one article, if approved, the new mandate means parents can sue adult children who are insufficiently attentive.

The Economic Lesson

Cities facilitate spillovers. A spillover is just the spread of something, such as a new idea, beyond the spot where it originated.

When a new idea easily spreads because firms are interconnected and people communicate more easily, we would say the spillover created a positive externality. That just means that an accomplishment that originally involved 2 entities, rippled outward to benefit many.

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