We develop a new distance-based test of localized knowledge spillovers that embeds the concept of control patents. Using microgeographic data, we identify localization distance for each technology class while allowing for spillovers across geographic units. We revisit the debate between Thompson and Fox-Kean (2005a, 2005b) and Henderson, Jaffe, and Trajtenberg (2005) on the existence of localized knowledge spillovers and find solid evidence supporting localization even when using finely grained controls. Unless biases induced by imperfect matching between citing and control patents due to unobserved heterogeneity are extremely large, our distance-based test detects localization for the majority of technology classes.
We investigate the 2008–2009 trade collapse using microdata from a small open economy, Belgium. Belgian exports and imports mostly fell because of smaller quantities sold and unit prices charged rather than fewer firms, trading partners, and products being involved in trade. Our difference-in-difference results point to a fall in the demand for tradables as the main driver of the collapse. Finance and involvement in global value chains played a minor role. Firm-level exports-to-turnover and imports-to-intermediates ratios reveal a comparable collapse of domestic and cross-border operations. Overall, our results reject a crisis of cross-border trade per se.