Spillover Cities ~ Economist on Scale Dynamics

The Economist notes that America’s big cities are larger than Europe’s. That has important economic consequences...

"Differences in metropolitan populations may help explain gaps in productivity and incomes. Western Europe’s per-person GDP is 72% of America’s, on a purchasing-power-parity basis. A recent study by the McKinsey Global Institute, the consultancy’s research arm, reckons that some three-quarters of this gap can be chalked up to Europe’s relatively diminutive cities. [...] Cities today have a productivity advantage for different reasons, to do with ideas rather than costs. When one firm in a city comes up with a new technique, product or design, nearby firms may quickly build on it or hire its creator. One firm’s innovation boosts its own productivity but also spills over to other businesses. Companies that prefer seclusion cut themselves off from these "knowledge spillovers."