Social Push and the Direction of Innovation

Abstract

What are the implications of unequal access to innovation careers for the direction of innovation and inequality? Leveraging novel linked datasets in the United States and Finland, we document that innovators create products more likely to be purchased by consumers like them in terms of gender, socioeconomic status, and age. Homophily exists both within narrow product categories and across industries, and has been stable in recent decades. Incorporating this “social push” channel into a growth model, we estimate that unequal access to innovation careers has a large effect on cost-of-living inequality and long-run growth.

Keywords: Direction of Innovation, Entrepreneurship, Inequality, Economic Growth

JEL Classification: L26, O31, O33, O41