Seminar – Local booms and innovation

Using oil and gas shocks as exogenous source of local business cycles in U.S. commuting zones, we provide novel evidence that innovation responds very locally to economic booms. Total patenting is procyclical, which we show to be driven by positive agglomeration economies. In contrast, patenting in oil and gas technology – the sector most closely linked to the boom – is countercyclical, consistent with larger opportunity costs of innovation when an industry is booming. These findings shed new light on the spatial dimension of innovation, inform the recent policy debate on local industrial policy, and help explain the mixed evidence on the cyclicality of innovation. Joint with Federica Coelli.

Room 1.01