We thank Sinem Buber, Mita Goldar and Matthew Levin from ADP for their support on the project. We also thank Steve Davis, Jan Eberly and Jonathan Parker for comments on prior drafts. As part of the University of Chicago data use contract, ADP reviewed the paper prior to distribution with the sole focus of making sure that the paper did not release information that would compromise the privacy of their clients or reveal proprietary information about the ADP business model. The views expressed in the paper are the authors' and do not necessarily reflect the views of ADP or the National Bureau of Economic Research. Additionally, the analysis and conclusions set forth here are those of the authors and do not indicate concurrence by other members of the research staff or the Board of Governors. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w27159.ack NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Using administrative payroll data from the largest U.S. payroll processing company, we document a series of new facts about nominal wage adjustments in the United States. We first show that per-period contract ("base") wages are a large share of compensation and are more persistent than bonuses suggesting that base wages may be a better proxy for allocative wages than average hourly earnings. Nominal base wage declines are much rarer than previously thought with only 2% of job-stayers receiving a nominal base wage cut during a given year. However, accounting for shifts in nominal wages of job-changers implies that aggregate nominal wages are more flexible than the base nominal wages of job-stayers. Other forms of compensation, such as bonuses, work similarly to sales in the output price literature, and provide a margin of short-run adjustment which may be important for earnings dynamics and for financially constrained firms. In addition, nominal wage adjustments are state-dependent: downward aggregate nominal wage adjustments were much more common during the Great Recessions than in the subsequent recovery period, and these downward adjustments were concentrated in industries hit hardest by the recession and in shrinking firms. Finally, we provide evidence that the flexibility of new hire base wages is similar to that of existing workers. Collectively, our results can be used to discipline models of worker nominal wage adjustments and models of wage rigidity. * We thank

We examine the golden age of U.S. innovation by undertaking a major data collection exercise linking historical U.S. patents to state and county-level aggregates and matching inventors to Federal Censuses between 1880 and 1940. We identify a causal relationship between patented inventions and long-run economic growth and outline a basic framework for analyzing key macro and micro-level determinants. We find a positive relationship between innovation and drivers of regional performance including population density, financial development and geographic connectedness. We also explore the impact of social structure measured by slavery and religion. We then profile the characteristics of inventors and their life cycle finding that inventors were highly educated, positively selected through exit early in their careers, made time allocation decisions such as delayed marriage, and tended to migrate to places that were conducive to innovation. Father's income was positively correlated with becoming an inventor, though not when controlling for the child's education. We show there were strong financial returns to technological development. Finally, we document an inverted-U shaped relationship between inequality and innovation but also show that innovative places tended to be more socially mobile. Our new data help to address important questions related to innovation and long-run growth dynamics.

This paper studies the effect of corporate and personal taxes on innovation in the United States over the twentieth century. We use three new datasets: a panel of the universe of inventors who patent since 1920; a dataset of the employment, location and patents of firms active in R&D since 1921; and a historical state-level corporate tax database since 1900, which we link to an existing database on state-level personal income taxes. Our analysis focuses on the impact of taxes on individual inventors and firms (the micro level) and on states over time (the macro level). We propose several identification strategies, all of which yield consistent results: i) OLS with fixed effects, including inventor and state-times-year fixed effects, which make use of differences between tax brackets within a state-year cell and which absorb heterogeneity and contemporaneous changes in economic conditions; ii) an instrumental variable approach, which predicts changes in an individual or firm's total tax rate with changes in the federal tax rate only; iii) event studies, synthetic cohort case studies, and a border county strategy, which exploits tax variation across neighboring counties in different states. We find that taxes matter for innovation: higher personal and corporate income taxes negatively affect the quantity and quality of inventive activity and shift its location at the macro and micro levels. At the macro level, cross-state spillovers or business-stealing from one state to another are important, but do not account for all of the effect. Agglomeration effects from local innovation clusters tend to weaken responsiveness to taxation. Corporate inventors respond more strongly to taxes than their non-corporate counterparts.