Information Technology and the Future of Cities

Will improvements in information technology eliminate face-to-face interactions and make cities obsolete? In this paper, we present a model where people make contacts and choose a mode of interaction: meeting face-to-face or communicating electronically. Cities are a means of reducing the fixed travel costs involved in face-to-face interactions. When telecommunications technology improves, there will be two opposing effects on cities and face-to-face interactions. First, some relationships that would have been face-to-face will be conducted electronically. Second, the increase in frequency of contact between individuals caused by improvements in telecommunications technology may result in more face-to-face interactions. If the second effect dominates, telecommunications improvements will complement both face-to-face interactions and cities. Our empirical work suggests that telecommunications may be a complement to, or at least not a strong substitute for, cities and face-to-face interactions.