Estimating the Local Productivity Spillovers from Science
January 2017
Working Paper Number:
CES-17-56
Abstract
We estimate the local productivity spillovers from science by relating wages and real estate
prices across metros to measures of scienti c activity in those metros. We address three fundamental challenges: (1) factor input adjustments using wages and real estate prices, along with Shepards Lemma, to estimate changes metros' productivity, which must equal changes in unit production cost; (2) unobserved differences in metros/causality using a share shift index that exploits historic variation in the mix of research in metros interacted with trends in federal funding for specific fields as an instrument; (3) unobserved differences in workers using data on the states in which people are born. Our estimates show a strong positive relationship between wages and scientifc research and a weak positive relationship for real estate prices. Overall, we estimate high rate of return to research.
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market,
endogeneity,
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Ordinary Least Squares,
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National Income and Product Accounts,
Federal Reserve Bank,
Retail Trade,
1940 Census,
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Public Administration,
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