Labor Force Demographics and Corporate Innovation
Review of Financial Studies, Forthcoming
96 Pages Posted: 29 Nov 2017 Last revised: 28 Aug 2022
Date Written: August 28, 2022
Firms in younger labor markets produce more innovation. We establish this by instrumenting the current labor force with historical births in each local labor market in the United States. Analyses of firms and inventors allow us to rule out unobservable heterogeneity across local labor markets and firms, life cycles, and other effects. Corporate innovation in younger labor markets reflects the innovative characteristics of younger labor forces, and its market value is higher. Younger workers as a group, not merely inventors by themselves, produce more innovation for firms through the labor force channel rather than through a financing or consumption channel.
Keywords: Innovation; Demographics; Labor markets; Inventors; Firm value
JEL Classification: G31, J11, J21, O31
Suggested Citation: Suggested Citation