The Creativity Decline: Evidence from US Patents

62 Pages Posted: 6 Jan 2023 Last revised: 25 Mar 2024

See all articles by Aakash Kalyani

Aakash Kalyani

Federal Reserve Banks - Research Division; Federal Reserve Banks - Research Division

Date Written: March 12, 2024

Abstract

Economists have long struggled to understand why aggregate productivity growth has dropped in recent decades while the number of new patents filed has steadily increased. I offer an explanation for this puzzling divergence: the creativity embodied in US patents has dropped dramatically over time. To separate creative from derivative patents, I develop a novel, text-based, measure of patent creativity: the share of technical terminology that did not appear in previous patents. I show that only creative and not derivative patents are associated with significant improvements in firm level productivity. Using the measure, I show that inventors on average file creative patents upon entry, and file derivative patents with more experience. I embed this life-cycle of creativity in a growth model with endogenous creation and imitation of technologies. In this model, falling population growth explains 27% of the observed decline in patent creativity, 30% of the slowdown in productivity growth, and 64% of the increase in patenting.

Keywords: Creativity, innovation, productivity, patents, text-as-data, demographics

JEL Classification: O11, O31, O34, O47

Suggested Citation

Kalyani, Aakash, The Creativity Decline: Evidence from US Patents (March 12, 2024). Available at SSRN: https://ssrn.com/abstract=4318158 or http://dx.doi.org/10.2139/ssrn.4318158

Aakash Kalyani (Contact Author)

Federal Reserve Banks - Research Division ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States

Federal Reserve Banks - Research Division ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States

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