Labor Force Demographics and Corporate Innovation
70 Pages Posted: 29 Nov 2017 Last revised: 4 May 2020
Date Written: May 2, 2020
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 has greater market value. Younger workers as a group – inventors interacting with non-inventors – produce more innovation for firms through the labor supply channel rather than through a financing supply or consumer demand channel.
Keywords: Innovation; Demographics; Labor markets; Inventors; Firm value
JEL Classification: G31, J11, J21, O31
Suggested Citation: Suggested Citation