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Technology-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.
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Specialization 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.
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Manufacturing Dispersion: How Data Cleaning Choices Affect Measured Misallocation and Productivity Growth in the Annual Survey of Manufactures
September 2025
Working Paper Number:
CES-25-67
Measurement of dispersion of productivity levels and productivity growth rates across businesses is a key input for answering a variety of important economic questions, such as understanding the allocation of economic inputs across businesses and over time. While item nonresponse is a readily quantifiable issue, we show there is also misreporting by respondents in the Annual Survey of Manufactures (ASM). Aware of these measurement issues, the Census Bureau edits and imputes survey responses before tabulation and dissemination. However, edit and imputation methods that are suitable for publishing aggregate totals may not be suitable for estimating other measures from the microdata. We show that the methods used dramatically affect estimates of productivity dispersion, allocative efficiency, and aggregate productivity growth. Using a Bayesian approach for editing and imputation, we model the joint distributions of all variables needed to estimate these measures, and we quantify the degree of uncertainty in the estimates due to imputations for faulty or missing data.
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National Chains and Trends in Retail Productivity Dispersion
September 2025
Working Paper Number:
CES-25-64
Productivity dispersion within an industry is an important characteristic of the business environment, potentially reflecting factors such as market structure, production technologies, and reallocation frictions. The retail trade sector saw significant changes between 1987 and 2017, and dispersion statistics can help characterize how it evolved over this period. In this paper, we shed light on this transformation by developing public-use Dispersion Statistics on Productivity (DiSP) data for the retail sector for 1987 through 2017. We find that from 1987 through 2017, dispersion increased between retail stores at the bottom and middle of the productivity distribution. However, when we weight stores by employment dispersion, the middle of the distribution is lower initially and decreases over time. These patterns are consistent with a retail landscape featuring more and more activity taking place in chain stores with similar productivity. Firm-based dispersion measures exhibit a similar pattern. Further investigation reveals that there is substantial heterogeneity in dispersion levels across industries.
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Property Rights, Firm Size and Investments in Innovation: Evidence from the America Invents Act
May 2025
Working Paper Number:
CES-25-31
I analyze whether a change in patent systems differentially affects firm-level innovation investments at patent-valuing firms of different sizes. Using legally required, economically representative, U.S. Census Bureau microdata, I separate firms into groups based on a firm's response to a question asking it to rank the degree of patent importance to its business and firm-size. I then measure how firms' innovation inputs/outputs respond to the America Invents Act (AIA). Results show the AIA reduced innovation investments at smaller, patent-valuing firms while increasing innovation investments at larger, patent-valuing firms, highlighting differential firm-size effects of patent policy and policy's importance to investments.
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Growth is Getting Harder to Find, Not Ideas
April 2025
Working Paper Number:
CES-25-21
Relatively flat US output growth versus rising numbers of US researchers is often interpreted as evidence that "ideas are getting harder to find." We build a new 46-year panel tracking the universe of U.S. firms' patenting to investigate the micro underpinnings of this claim, separately examining the relationships between research inputs and ideas (patents) versus ideas and growth. Over our sample period, we find that researchers' patenting productivity is increasing, there is little evidence of any secular decline in high-quality patenting common to all firms, and the link between patents and growth is present, differs by type of idea, and is fairly stable. On the other hand, we find strong evidence of secular decreases in output unrelated to patenting, suggesting an important role for other factors. Together, these results invite renewed empirical and theoretical attention to the impact of ideas on growth. To that end, our patent-firm bridge, which will be available to researchers with approved access, is used to produce new, public-use statistics on the Business Dynamics of Patenting Firms (BDS-PF).
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The Geography of Inventors and Local Knowledge Spillovers in R&D
October 2024
Working Paper Number:
CES-24-59
I causally estimate local knowledge spillovers in R&D and quantify their importance when implementing R&D policies. Using a new administrative panel on German inventors, I estimate these spillovers by isolating quasi-exogenous variation from the arrival of East German inventors across West Germany after the Reunification of Germany in 1990. Increasing the number of inventors by 1% increases inventor productivity by 0.4%. I build a spatial model of innovation, and show that these spillovers are crucial when reducing migration costs for inventors or implementing R&D subsidies to promote economic activity.
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Supply Chain Adjustments to Tariff Shocks: Evidence from Firm Trade Linkages in the 2018-2019 U.S. Trade War
August 2024
Working Paper Number:
CES-24-43
We use the 2018-2019 U.S. trade war to examine how supply chains adjustments to a tariff cost shock affect imports and exports. Using confidential firm-trade linked data, we show that the decline in imports of tariffed goods was driven by discontinuations of U.S. buyer'foreign supplier relationships, reduced formation of new relationships, and exits by U.S. firms from import markets altogether. However, tariffed products where imports were concentrated in fewer suppliers had a smaller decline in import growth. We then construct measures of export exposure to import tariffs by linking tariffs paid by importing firms to their exported products. We find that the most exposed products had lower exports in 2018-2019, with most of the impact occurring in 2019.
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Are Immigrants More Innovative? Evidence from Entrepreneurs
November 2023
Working Paper Number:
CES-23-56
We evaluate the contributions of immigrant entrepreneurs to innovation in the U.S. using linked survey-administrative data on 199,000 firms with a rich set of innovation measures and other firm and owner characteristics. We find that not only are immigrants more likely than natives to own businesses, but on average their firms display more innovation activities and outcomes. Immigrant owned firms are particularly more likely to create completely new products, improve previous products, use new processes, and engage in both basic and applied R&D, and their efforts are reflected in substantially higher levels of patents and productivity. Immigrant owners are slightly less likely than natives to imitate products of others and to hire more employees. Delving into potential explanations of the immigrant-native differences, we study other characteristics of entrepreneurs, access to finance, choice of industry, immigrant self-selection, and effects of diversity. We find that the immigrant innovation advantage is robust to controlling for detailed characteristics of firms and owners, it holds in both high-tech and non-high-tech industries and, with the exception of productivity, it tends to be even stronger in firms owned by diverse immigrant-native teams and by diverse immigrants from different countries. The evidence from nearly all measures that immigrants tend to operate more innovative and productive firms, together with the higher share of business ownership by immigrants, implies large contributions to U.S. innovation and growth.
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Patents, Innovation, and Market Entry
September 2023
Working Paper Number:
CES-23-45
Do patents facilitate market entry and job creation? Using a 2014 Supreme Court decision that limited patent eligibility and natural language processing methods to identify invalid patents, I find that large treated firms reduce job creation and create fewer new establishments in response, with no effect on new firm entry. Moreover, companies shift toward innovation aimed at improving existing products consistent with the view that patents incentivize creative destruction.
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