Innovation and Top Income Inequality

Abstract

In this article, we use cross-state panel and cross-U.S. commuting-zone data to look at the relationship between innovation, top income inequality and social mobility. We find positive correlations between measures of innovation and top income inequality. We also show that the correlations between innovation and broad measures of inequality are not significant. Next, using instrumental variable analysis, we argue that these correlations at least partly reflect a causality from innovation to top income shares. Finally, we show that innovation, particularly by new entrants, is positively associated with social mobility, but less so in local areas with more intense lobbying activities.

Betting On Exports: Trade and Endogenous Heterogeneity

“…31 Using geographic data, we can instead obtain a measure of innovation for a wide and long panel of US states. In particular, we proxy for innovation intensity, i, using the log number of granted utility patents, by year of application, per 1,000 workers in each US state, using patent data sourced from Aghion et al (2015). 32 Patents correlate strongly with R&D expenditure and are well suited to measure significant innovations.…”

“…They cover 90% of all patents registered at the US patent office (USPTO). See Aghion et al (2015) for more discussion on this point. essentially unchanged.…”

“…To construct our measure of innovation intensity, we use the number of granted utility patents, by year of application, in each US state and year. The original data are sourced from Aghion et al (2015) and are available for the period 1970-2009. The data contain information on all patents registered at the US Patent Office (USPTO); each patent is located to the state where its inventor works or lives.…”

“…() and Antonin Bergeaud and David Hemous for sharing some of the patent data used in Aghion et al . (). We acknowledge financial support from the Barcelona GSE, the Spanish Ministry of Economy and Competitiveness (ECO2014‐55555‐P and ECO2014‐59805‐P) and the Fundación Ramón Areces.…”

“…To do so, we follow Aghion et al . () in switching to geographic data and use patent counts to build a measure of innovation intensity for a panel of US states over the period 1989–2007. We also follow Autor et al .…”