Innovation is the underlying driver of economic growth and rising living standards. But recently, high-tech startups and tech workers have been blamed for rising inequality and for pricing residents out of housing in leading tech hubs such as San Francisco. Last year’s protests over Google Buses shuttling employees from the city to its Silicon Valley campus while the rest of San Francisco’s public transportation system was underfunded is perhaps the perfect case in point. At the same time, economists have found that as inequality has risen over the past couple of decades, the rate of innovation has fallen, especially since the economic crisis.
Is innovation really to blame for rising inequality?
A June NBER study by a team of economists from Harvard, the University of Pennsylvania, and the University College London takes a close look at the connection between the two. Specifically, it examines the connection between innovation (measured by patenting) and the widening economic gap at the very top—between the one percent and everyone else—across states between 1975 and 2010. It also examines the relationship between innovation and more conventional types of inequality between the upper and lower classes.