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Title: Who Profits from Patents? Rent-Sharing at Innovative Firms*
Abstract This article analyzes how patent-induced shocks to labor productivity propagate into worker compensation using a new linkage of U.S. patent applications to U.S. business and worker tax records. We infer the causal effects of patent allowances by comparing firms whose patent applications were initially allowed to those whose patent applications were initially rejected. To identify patents that are ex ante valuable, we extrapolate the excess stock return estimates of Kogan et al. (2017) to the full set of accepted and rejected patent applications based on predetermined firm and patent application characteristics. An initial allowance of an ex ante valuable patent generates substantial increases in firm productivity and worker compensation. By contrast, initial allowances of lower ex ante value patents yield no detectable effects on firm outcomes. Patent allowances lead firms to increase employment, but entry wages and workforce composition are insensitive to patent decisions. On average, workers capture roughly 30 cents of every dollar of patent-induced surplus in higher earnings. This share is roughly twice as high among workers present since the year of application. These earnings effects are concentrated among men and workers in the top half of the earnings distribution and are paired with corresponding improvements in worker more » retention among these groups. We interpret these earnings responses as reflecting the capture of economic rents by senior workers, who are most costly for innovative firms to replace. « less
Authors:
; ; ;
Award ID(s):
1752431
Publication Date:
NSF-PAR ID:
10133724
Journal Name:
The Quarterly Journal of Economics
Volume:
134
Issue:
3
Page Range or eLocation-ID:
1343 to 1404
ISSN:
0033-5533
Sponsoring Org:
National Science Foundation
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