Where Have All the "Creative Talents" Gone? Employment Dynamics of US Inventors
April 2023
Working Paper Number:
CES-23-17
Abstract
How are inventors allocated in the US economy and does that allocation affect innovative capacity? To answer these questions, we first build a model where an inventor with a new idea has the possibility to work for an entrant or incumbent firm. Strategic considerations encourage the incumbent to hire the inventor, offering higher wages, and then not implement her idea. We then combine data on 760 thousand U.S. inventors with the LEHD data. We find that when an inventor is hired by an incumbent, their earnings increases by 12.6 percent and their innovative output declines by 6 to 11 percent.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
estimation,
economist,
estimating,
disclosure,
earnings,
technological,
entrepreneur,
entrepreneurship,
innovation,
inventory,
patent,
innovate,
revenue,
patenting,
gdp,
innovative,
innovating
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Total Factor Productivity,
Longitudinal Business Database,
North American Industry Classification System,
American Community Survey,
Patent and Trademark Office,
Longitudinal Employer Household Dynamics,
LEHD Program,
Census Bureau Disclosure Review Board,
Business Dynamics Statistics,
Census Bureau Business Dynamics Statistics
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Where Have All the "Creative Talents" Gone? Employment Dynamics of US Inventors' are listed below in order of similarity.
-
Working PaperTechnology-Driven Market Concentration through Idea Allocation🔥
December 2025
Working Paper Number:
CES-25-78
Using a newly-created measure of technology novelty, this paper identifies periods with and without technology breakthroughs from the 1980s to the 2020s in the US. It is found that market concentration decreases at the advent of revolutionary technologies. We establish a theory addressing inventors' decisions to establish new firms or join incumbents of selected sizes, yielding two key predictions: (1) A higher share of inventors opt for new firms during periods of heightened technology novelty. (2). There is positive assortative matching between idea quality and firm size if inventors join incumbents. Both predictions align with empirical findings and collectively contribute to a reduction in market concentration when groundbreaking technologies occur. Quantitative analysis shows the overall slowdown in technological breakthroughs can capture 95.9% of the rising trend in market concentration and the correlation between the model-generated and the actual detrended market concentration is 0.910.View Full Paper PDF
-
Working PaperThe Color of Money: Federal vs. Industry Funding of University Research
September 2021
Working Paper Number:
CES-21-26
U.S. universities, which are important producers of new knowledge, have experienced a shift in research funding away from federal and towards private industry sources. This paper compares the effects of federal and private university research funding, using data from 22 universities that include individual-level payments for everyone employed on all grants for each university year and that are linked to patent and Census data, including IRS W-2 records. We instrument for an individual's source of funding with government-wide R&D expenditure shocks within a narrow field of study. We find that a higher share of federal funding causes fewer but more general patents, more high-tech entrepreneurship, a higher likelihood of remaining employed in academia, and a lower likelihood of joining an incumbent firm. Increasing the private share of funding has opposite effects for most outcomes. It appears that private funding leads to greater appropriation of intellectual property by incumbent firms.View Full Paper PDF
-
Working PaperMeasuring the Characteristics and Employment Dynamics of U.S. Inventors
September 2022
Working Paper Number:
CES-22-43
Innovation is a key driver of long run economic growth. Studying innovation requires a clear view of the characteristics and behavior of the individuals that create new ideas. A general lack of rich, large-scale data has constrained such analyses. We address this by introducing a new dataset linking patent inventors to survey, census, and administrative microdata at the U.S. Census Bureau. We use this data to provide a first look at the demographic characteristics, employer characteristics, earnings, and employment dynamics of inventors. These linkages, which will be available to researchers with approved access, dramatically increases the scope of what can be learned about inventors and innovative activity.View Full Paper PDF
-
Working PaperDo Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms
February 2020
Working Paper Number:
CES-20-06
This paper examines how employee earnings at small firms respond to a cash flow shock in the form of a government R&D grant. We use ranking data on applicant firms, which we link to IRS W2 earnings and other U.S. Census Bureau datasets. In a regression discontinuity design, we find that the grant increases average earnings with a rent-sharing elasticity of 0.07 (0.21) at the employee (firm) level. The beneficiaries are incumbent employees who were present at the firm before the award. Among incumbent employees, the effect increases with worker tenure. The grant also leads to higher employment and revenue, but productivity growth cannot fully explain the immediate effect on earnings. Instead, the data and a grantee survey are consistent with a backloaded wage contract channel, in which employees of financially constrained firms initially accept relatively low wages and are paid more when cash is available.View Full Paper PDF
-
Working PaperPay, Employment, and Dynamics of Young Firms
July 2019
Working Paper Number:
CES-19-23
Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.View Full Paper PDF
-
Working PaperOlder and Slower: The Startup Deficit's Lasting Effects on Aggregate Productivity Growth
June 2018
Working Paper Number:
CES-18-29
We investigate the link between declining firm entry, aging incumbent firms and sluggish U.S. productivity growth. We provide a dynamic decomposition framework to characterize the contributions to industry productivity growth across the firm age distribution and apply this framework to the newly developed Revenue-enhanced Longitudinal Business Database (ReLBD). Overall, several key findings emerge: (i) the relationship between firm age and productivity growth is downward sloping and convex; (ii) the magnitudes are substantial and significant but fade quickly, with nearly 2/3 of the effect disappearing after five years and nearly the entire effect disappearing after ten; (iii) the higher productivity growth of young firms is driven nearly exclusively by the forces of selection and reallocation. Our results suggest a cumulative drag on aggregate productivity of 3.1% since 1980. Using an instrumental variables strategy we find a consistent pattern across states/MSAs in the U.S. The patterns are broadly consistent with a standard model of firm dynamics with monopolistic competition.View Full Paper PDF
-
Working PaperBusiness Formation: A Tale of Two Recessions
January 2021
Working Paper Number:
CES-21-01
The trajectory of new business applications and transitions to employer businesses differ markedly during the Great Recession and COVID-19 Recession. Both applications and transitions to employer startups decreased slowly but persistently in the post-Lehman crisis period of the Great Recession. In contrast, during the COVID-19 Recession new applications initially declined but have since sharply rebounded, resulting in a surge in applications during 2020. Projected transitions to employer businesses also rise but this is dampened by a change in the composition of applications in 2020 towards applications that are more likely to be nonemployers.View Full Paper PDF
-
Working PaperDynamics of High-Growth Young Firms and the Role of Venture Capitalists
June 2025
Working Paper Number:
CES-25-38
Motivated by the substantial growth and upfront investments of venture capital (VC) backed firms observed in administrative US Census data, this paper develops a firm dynamics model over the life cycle. In the model, startups choose the source of financing from VC, Angel investors, or banks, depending on their growth potential, and invest in innovation. The calibrated model explains the life-cycle dynamics of firms with different sources of financing and implies that venture capitalists' advice accounts for around 22% of the growth of VC-backed firms. A counterfactual economy without VC financing would lose aggregate consumption by around 0.4%.View Full Paper PDF
-
Working PaperCompetition, Firm Innovation, and Growth under Imperfect Technology Spillovers
July 2024
Working Paper Number:
CES-24-40
We study how friction in learning others' technology, termed 'imperfect technology spillovers,' incentivizes firms to use different types of innovation and impacts the implications of competition through changes in innovation composition. We build an endogenous growth model in which multi-product firms enhance their products via internal innovation and enter new product markets through external innovation. When learning others' technology takes time due to this friction, increased competitive pressure leads firms with technological advantages to intensify internal innovation to protect their markets, thereby reducing others' external innovation. Using the U.S. administrative firm-level data, we provide regression results supporting the model predictions. Our findings highlight the importance of strategic firm innovation choices and changes in their composition in shaping the aggregate implications of competition.View Full Paper PDF
-
Working PaperSpecialization in a Knowledge Economy
December 2025
Working Paper Number:
CES-25-77
Using firm-level data from the US Census Longitudinal Business Database (LBD), this paper exhibits novel evidence about a wave of specialization experienced by US firms in the 1980s and 1990s. Specifically: (i) Firms, especially innovating ones, decreased production scope, i.e., the number of industries in which they produce. (ii) Innovation and production separated, with small firms specializing in innovation and large firms in production. Higher patent trading efficiency and stronger patent protection are proposed to explain these phenomena. An endogenous growth model is developed with potential mismatches between innovation and production. Calibrating the model suggests that increased trading efficiency and better patent protection can explain 20% of the observed production scope decrease and 108% of the innovation and production separation. They result in a 0.64 percent point increase in the annual economic growth rate. Empirical analyses provide evidence of causality from pro-patent reforms in the 1980s to the two specialization patterns.View Full Paper PDF
