Economic Impact of Investments in R&D and Science and Engineering Workers (NSF NSCE 1918445, G. Marschke, PI)

Abstract: The U.S. economy is a global leader in innovation, and its workforce is highly mobile. This project investigates the link between innovation and labor mobility, examining the role of the movement of workers (especially scientists and engineers) in fostering and diffusing innovation in the economy. The research addresses how the science and engineering workforce of firms and establishments affect productivity: In a firm, does mixing together workers with diverse employment histories help generate new ideas and foster innovation? Does movement of workers between firms help spread new ideas and transfer technology across firms in the economy? Answering these questions provides a better understanding of dynamic, regional agglomeration economies, such as Silicon Valley, and the mechanisms behind economic growth. This research has ramifications for policies relating to labor mobility, innovation, and investment in R&D and science and engineering workers. If the spread of ideas and technology through worker mobility is important to economic growth, then the formulation of policies that influence mobility of workers within labor markets or among regions, states, and countries—e.g., tax and health insurance policies, housing and urban policy, immigration policy, intellectual property rules and enforcement of noncompete covenants in employment—need to be sensitive to their effect on economic growth and productivity.

The project uses detailed, economy-wide employer-employee linked data on workers’ employment histories and employer characteristics, combined with data on firms’ R&D, to analyze the diffusion of technology through the economy. The project produces new estimates of the private returns to R&D, at the firm and business establishment level. There is substantial evidence that R&D spillovers between firms are important and have an impact that is at least of the same order of magnitude as the direct, private returns to R&D investment. The project develops new evidence on the sources of R&D spillovers and the magnitudes of spillovers at the firm and establishment levels. The research addresses two interrelated questions about R&D spillovers: (i) Are worker flows an important source of knowledge spillovers between firms? (ii) How do labor mobility-mediated knowledge spillovers relate to the technology spillovers between firms documented in previous research? In particular, are labor mobility-mediated knowledge spillovers the source of technology spillovers, or are they an additional and separate effect? The project research contributes to the understanding of wage formation for science and engineering workers, and workers in other occupations that are exposed to or participate in R&D activities; and expands understanding of how scientific and technological advances stimulate economic activity, and how investments in R&D and in workers propagate through the economy. The research approach is especially promising because of its use of rich and comprehensive microdata at economy-wide scale The research contributes to NSF/Census R&D survey data collection and utility, by developing machine learning methods for identifying smaller R&D-performing firms, and allocating firms’ R&D investments to the relevant establishments of the firm.