CAREER: Understanding Economic Growth: Firms, Inventors, and Ideas

University Of Chicago, Chicago IL

Investigators

Abstract

The main focus of this research is to understand the links between innovation, technical progress, and economic growth and to study the best industrial policies to improve economic growth and welfare in the U.S. Specifically, this research focuses on three major components of innovation and economic growth: (i) inventors, (ii) firms, and (iii) ideas (patents). The first part of this project examines the golden age of American innovation by undertaking a major data matching exercise linking U.S. patent records with data from Federal Censuses between 1880 and 1940 as a guide to the future. Then it studies the relationship between patented inventions and long-run economic growth, and outlines a framework for analyzing key macro- and micro-level determinants of innovativeness and growth. Over the last several decades economy-wide startup rates have declined in excess of twelve percent, while measures of factor reallocation and dispersion in firm growth rates have declined in excess of twenty percent. The second part of the project studies these changes in the U.S. economy. This part of the project focuses on understanding patterns of growth and innovation in the U.S. economy and ties together various empirical regularities using micro data from the U.S. economy. The goal is to understand the reasons for these changes and propose policies that can reconstruct entrepreneurship and job creation. The third part of this project studies the market for patents. How do non-practicing entities (NPEs) impact innovation and technological progress? This project provides new theoretical and empirical evidence on the subject. In doing so the project informs the debate that has portrayed NPEs alternatively as benign middlemen that help to reallocate intellectual property to where it is most productive or stick-up artists that exploit the patent system to extract rents, thereby hurting innovation. As part of the project, the PI also plans to prepare a comprehensive set of online education materials on economic growth that will be freely accessible to everyone. The goal is to disseminate high-quality, but free materials to a broad range of students, including those who did not get the chance to study at a top institution. The results of this research will contribute to economic growth, job creation and competitiveness of the U.S. economy. Our understanding of macroeconomic growth and technological progress can be significantly improved by combining micro and macro perspectives. A macroeconomy is made of lots of micro firms that hire inventors to produce new innovative ideas. Therefore, this proposal--by focusing on the microeconomics of ideas, inventors, and firm behavior--aims to shed light on macroeconomic growth by capturing the rich heterogeneity in innovation behavior at the firm level by using the wealth of information on innovation and firm behavior. In addition, formal models allow us to make verbal notions operational and confront them with data. Therefore, this proposal also focuses on combining general equilibrium growth theories with rich micro data on millions of U.S. patents, inventors, and firms. By also using structural estimation techniques, this proposal will allow the PI not only to understand the underlying mechanisms, but also to do counterfactual policy exercises where the PI can study optimal industrial policy design.