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date: 18 January 2021

Abstract and Keywords

The literature on the geographical implications of the Internet are reviewed, both those studying the adoption and use of the Internet, as well as those examining the Internet’s economic consequences for productivity, wealth, innovation, trade, and consumer behavior. The chapter emphasizes that the Internet reduces three key interrelated economic frictions: communication costs, transportation costs, and search costs. The impact of reducing these frictions varies across locations because it depends on three factors that vary locally: preferences, the availability of substitutes, and the availability of complements. Thus, the diffusion of the Internet benefits some locations more than others. The chapter concludes by discussing directions for future research.

Keywords: Internet, geography, communication costs, transportation costs, search costs

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