Labor Force Demographics and Corporate Innovation

Abstract 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 its market value is higher. Younger workers as a group, not merely inventors by themselves, produce more innovation for firms through the labor force channel rather than through a financing or consumption channel. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.