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Why it matters where disruptive technologies originate: National Bureau of Economic Research

Economic growth, economic inequality, entrepreneurship: all factors crucially important to understand as we seek to improve our society and better our collective well-being.

A new National Bureau of Economic Research working paper delves into a key element driving these factors, namely, the development of novel technologies. The paper examines the degree to which these technologies affect jobs, and the speed with which they spread across regions, firms, and industries.

The authors note that it has proven difficult to measure the development and spread of multiple technological advances in a single framework, and to separate those innovations that affect jobs and businesses from those that do not.

To overcome this challenge, they identify novel technologies using textual analysis of millions of patents and job postings and hundreds of thousands of earnings conference calls over the past two decades.

This approach enables them to identify and document the diffusion of 29 disruptive technologies across firms and labour markets in the U.S. The research highlights five main conclusions:

  1. The locations where technologies are developed that later disrupt businesses are geographically highly concentrated, even more so than overall patenting.
  2. Despite this initial concentration, jobs relating to use or production of the new technologies gradually spread out geographically.
  3. While initial jobs associated with a given technology are typically high skilled, over time the mean required skill levels of the new jobs declines.
  4. These trends towards region and skill broadening are related: low-skill jobs associated with a given technology spread out geographically significantly faster than high-skill ones.
  5. Because of the slower spread of high-skill jobs, disruptive technologies continue to offer long-lasting benefits for their pioneer locations, which retain a long-term advantage in these high-quality jobs for multiple decades.
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