The Spatial Mismatch between Innovation and Joblessness NBER Innovation Policy and the Economy, Volume 20, 2019)
(with Edward Glaeser)
Abstract: American technological creativity is geographically concentrated in areas that are generally distant from the country’s most persistent pockets of joblessness. Could a more even spatial distribution of innovation reduce American joblessness? Could Federal policies disperse innovation without significant costs? If research funding is already maximizing knowledge production, then spatial reallocation of that funding will reduce America’s overall innovation unless that reallocation comes with greater spending. Without any spatial reallocation, the primarily inventive parts of innovation policy, such as N.I.H. grants, can potentially aid underperforming areas by targeting the problems of those areas, like widespread disability. The educational aspects of innovation policy, such as Pell Grants, work-study, vocational training, and Federal overhead reimbursement on grants, currently have multiple objectives and could focus more on employability in distressed areas. Lifting the cap on H1B visas in poorer places could attract outside human capital to those places. Geographically targeted entrepreneurship policies, such as eliminating the barriers to new business formation near universities and in distressed places, could potentially enhance employment growth in those regions. Spatially targeted employment subsidies will increase the returns to labor-intensive innovation in depressed areas, but we know little about how much innovation will respond to such subsidies.
University Innovation and Local Economic Growth , The Review of Economics and Statistics, 104: 718-735, July 2022.
Abstract: Universities, often at the center of innovative clusters, are believed to be important drivers of local economic growth. This paper identifies the extent to which knowledge from U.S. universities drives industry agglomeration; it uses a national shock to the spread of innovation from universities -- the Bayh-Dole Act of 1980 – combined with pre-determined variation both within a university in technological strengths and across universities in federal research funding. Results using longitudinal establishment-level data from the Census indicate faster growth in employment, wages, and corporate innovation after Bayh-Dole in industries more closely related to the nearby university’s innovative strengths. Places receiving more federal research funding ex-ante experienced both faster overall growth and larger between-industry growth differences. Supportive of the role of local knowledge spillovers, the impact of university ideas strengthens with geographic proximity to the university, density, and local skills. Consistent with spatial equilibrium models, the growth effect is driven by substantial entry to the geographic area in university-linked industries, especially of multi-unit expansions; these firms disproportionately partner with universities in R&D, transfer IP, and innovate.
Physician Practice Organization and Negotiated Prices: Evidence from State Law Changes American Economic Journal: Applied Economics, 13(2): 258-296, April 2021.
(with Kurt Lavetti)
Abstract: We study the relationship between the organization of physician practices and prices negotiated with private insurers. Using variation from state-level judicial decisions, we show that changes in the enforceability of non-compete agreements (NCAs) in physician employment contracts alter the organization of physician practices and the service prices they charge. The effects of these NCA decisions are economically meaningful: an increase in NCA enforceability of 10% of the observed policy spectrum causes a 3.7% increase in average physician prices. Using two databases containing the universe of physician establishments and firms in the US between 1996 and 2007, linked to prices negotiated with private insurance companies, we show that this price effect is associated with reductions in practice sizes and market concentration that increase prices for services with high practice overhead costs. Using these judicial decisions as instruments, we estimate that a 100 point increase in the establishment-based Herfindahl Index (HHI) causes a 1.3% to 1.7% decline in prices, consistent with insurers extracting efficiency gains from larger establishments. In contrast, the same change in concentration caused by physically-distinct establishments negotiating jointly as a firm leads to price increases of 1.0% to 2.0%.
Homeownership, Labor Supply, and Neighborhood Quality American Economic Journal: Economic Policy, 14(2): 193-230, May 2022.
(with Tamar Ramot-Nyska and Noam Zussman)
Abstract: This paper provides new evidence on the external neighborhood benefits of homeownership among low-income populations using a natural experiment in Israel that generated large changes in neighborhood homeownership rates while holding fixed the residents and housing stock, two primary sources of bias in traditional estimates of homeownership effects. When public housing tenants are given the opportunity to buy their units, eventual buyers significantly increase their labor supply on both the extensive and intensive margins. And the effects are felt in the neighborhood: when homeownership rates rise by 10 percentage points due to sales of these public housing units to sitting tenants, prices of neighborhood homes rise by 1.5-2%, reflecting an improvement in neighborhood quality. To address endogeneity in tenants’ decisions to buy their homes, we take advantage of intertemporal and cross-sectional variation in purchase price discounts exogenously set by the government, and we find similar results. We discuss the conditions under which these effects may be interpreted as homeownership effects, per se, versus privatization effects. Evidence supports the general relevance of our results for policies that increase homeownership among low income populations using financial incentives.
Innovation and Capital Journal of Financial Economics, 169: 104029, July 2025.
(with Daniel Fehder and Yael Hochberg)
Abstract: Using a regime change in the commercialization of university innovation in 1980 that strongly increased university incentives to patent and license discoveries, we document that an increase in the supply of commercializable innovation attracts venture capital investment to the region. The Bayh-Dole Act shifted ownership of intellectual property stemming from federally-funded research from the federal government to universities, spurring technology transfer into the local area. Because universities have different technological strengths, each local area surrounding a university experienced an increase after 1980 in commercializable innovation relevant to particular sets of industries which differed widely across university counties. Comparing industries within a county that were more versus less related to the local university's innovative strengths, we show that venture capital dollars after 1980 flowed systematically towards geographic areas and industries affected most by the sudden influx of commercializable innovation from universities. These results persist even when controlling for ex ante geographic and industry distributions of corporate patenting and prior venture financing. The findings support the notion that increased supply of commercializable innovation serves to draw private capital investment to a region.
Urban Pull: The Roles of Amenities and Employment , Regional Science and Urban Economics, Vol. 114, September 2025, 104127. https://doi.org/10.1016/j.regsciurbeco.2025.104127
(with Peleg Samuels, Maxime Cohen, and Roy Sasson)
Abstract: This paper leverages new measurement of neighborhood consumption amenities to demonstrate that housing prices and rents in U.S. cities are likely determined nearly as much by access to amenities as by access to employment. We extend the Alonso-Muth-Mills model, allowing residents to derive utility from within-city trips to amenities. The model delivers standard estimable log-linear pricing equations as well as new measures of local amenities---based on a destination’s popularity during leisure hours---and of access to consumption amenities city wide. We find our amenity measures add substantial explanatory power, have large effects in magnitude, and reduce naive estimates of commute costs by 30%. Elasticities of rents with respect to employment access are 20-50% larger than those with respect to amenity access. The findings hold using a variety of alternative measures and are neither driven by density nor fully explained by the locations of business establishments. These results suggest the potential resilience of cities to changes in employment locations.
Generative AI's Impact on Student Achievement and Implications for Worker Productivity, Revision Submitted, Review of Corporate Finance Studies
(with Oren Rigbi and Sarit Weisburd)
Abstract: Student use of Artificial Intelligence (AI) in higher education is reshaping learning and redefining the skills of future workers. Using student-course data from a top Israeli university, we examine the impact of generative AI tools on academic performance. Comparisons across more and less AI-compatible courses before and after ChatGPT's introduction show that AI availability raises grades, especially for lower-performing students, and compresses the grade distribution, eroding the signal value of grades for employers. Evidence suggests gains in AI-specific human capital but possible losses in traditional human capital, highlighting benefits and costs AI may impose on future workforce productivity.
Entrepreneurs and City Growth Revise & Resubmit, Journal of Economic Geography
Abstract: Entrepreneurs are often thought to be important drivers of economic growth. This paper shows that local entrepreneurs have strong complementarities with national industry tailwinds in generating city growth. Although substantial literature on national industry shocks to local labor markets suggests a city’s growth is largely determined by the national performance of its prominent industries, in fact the local growth response is importantly mediated by the local employment distribution across firm types within industry. Cities grow more in response to equally sized national industry shocks when their employment in the shocked industry is tilted towards small, incorporated firms. Having illustrated this empirical feature of cities, the paper presents evidence on three sets of theories aiming to explain the importance of entrepreneurs: (1) that entrepreneurs encourage entry, (2) that entrepreneurs facilitate knowledge spillovers and innovation, and (3) that entrepreneurs simply represent human capital, already a central feature of growth models. Microdata from the U.S. Census’ LBD, which permits examination of establishment and firm dynamics, indicate an important role of entrepreneurs in encouraging growth from entry of new establishments. LBD-linked surveys providing new insight into cross-firm interactions – based on R&D activities, innovation and technology transfer, IT investment, and IT use – lend support to the knowledge spillovers theory of entrepreneurship effects. Local availability of human capital, in contrast, cannot explain the entrepreneurship effect.
Capital Gains Taxes, Household Portfolios, and the Deadweight Burden of Lock-In (with Stephen Miran) Draft: October 2010
Abstract: We study capital gains tax lock-in for household portfolios and estimate the deadweight costs of this behavioral response. Taxes inhibit about one-fourth of the rebalancing in which households would otherwise engage, resulting in a simulated excess burden of 10-25% of revenue for the median household. We explore a variety of rational and behavioral portfolio responses to taxation, and both within- and between-model heterogeneity. Super-rational (S,s) rules describe only a small portion of the sample; most of the sample is better described by a behavioral model of churning in which households trade assets without respect to their underlying risk properties. Households classified as more rational have higher incomes, are better diversified, and trade less. Households that are wealthier, churn less, and are better diversified suffer smaller welfare losses.
Works in Progress
Non-compete Law, Labor Mobility, and Entrepreneurship
Abstract: Worker mobility between jobs is a primary mechanism through which knowledge flows across firms and new ideas are created from the mixing of existing ones, in both existing firms and new, entrepreneurial ones. But non-compete agreements (NCAs) in workers’ employment contracts create frictions that may limit worker mobility and new business creation. Using rich variation in state-level NCA enforcement along 7 legal dimensions over nearly 20 years from 1991-2009, this paper shows in a variety of data sets that NCA enforcement has important effects. Within states, a reduction in stringency of enforcement due to judicial decisions causes an average 1.5-2 percentage point increase in worker job changes in the CPS, with the largest effects in occupations known to use NCAs heavily to protect firm ideas (tech) or client relationships (health, hairdressers). A larger increase in switches is apparent among the much more mobile population of inventors in patent data. Reductions in NCA enforcement also generate an increase in new firm entry, suggesting that some would-be entrepreneurs are constrained by non-compete enforcement in their state. As a whole, the evidence implies that states may be able to facilitate greater knowledge spillovers and entrepreneurship by easing enforcement of non-competes and minimizing frictions associated with job changes.
Government R&D Grants and Startup Growth (with Ron Rabi)
Abstract: Governments in Western countries often subsidize entrepreneurial ventures in order to promote innovation and economic growth. This paper evaluates the short- and medium-term effects of the Israeli commercial R&D support program on a startup's ability to raise private funds, attract quality investors, survive, and grow. We take advantage of cutoffs in application scores to generate regression discontinuity estimates of the effect of receiving a grant, and we supplement these estimates with others that rely on matching techniques. Using both administrative data from the Israel Innovation Authority and supplemental data on employment, sales, and private funding from the Israel Venture Capital (IVC) Research Center, we find evidence of positive effects on first year survival rates as well as on the probability of achieving positive sales. However, we find that the support has no impact on a startup's ability to raise further private funds, attract higher quality investors, survive after the first year, and add employment. The limited added value of these grants on the margin suggests the possibility of suboptimal grant allocation.
Health Insurance Costs and Young Firms
Abstract: A common argument in the US health policy debate is that rising health insurance costs, coupled with the typing of insurance to employers, inhibits the survival and growth of entrepreneurial firms. Economic theory suggests that these costs may indeed adversely affect small businesses: the firms may be unable to pass on to employees the full cost of benefits due to downward nominal wage rigidities or labor market competition with large firms. I use the Kauffman Firm Survey of businesses beginning formal operations in 2004 to measure the effects of rising health costs on firm survival, employment growth, and propensity to offer insurance in each subsequent year. I exploit variation in insurance premia over time and across states, instrumenting for endogenous premium growth using insurance market regulation and tort reform. Estimates suggest that firms facing higher growth in health costs are more likely to offer insurance, possibly due to the higher value of insurance when potential loss rises. I find no significant effect of rising health costs on firm survival or employment growth and can rule out large negative effects.