Essays on knowledge diffusion, innovation, and growth

This dissertation consists of three essays on innovation and growth. Chapter 1 studies the impact of the IT revolution on productivity growth and sectoral reallocation of economic activities in the U.S. I analyze the role of information and communications technologies (ICT) in facilitating knowledge diffusion in the economy. The increased flow of ideas between firms and industries improves learning opportunities and spurs innovation, while at the same time broadens accessibility of knowledge to potential competitors. I develop a general equilibrium endogenous growth model featuring this mechanism. In the model, industries are heterogeneous in their external knowledge dependence. The model implies that the IT revolution triggers reallocation of economic activities towards sectors that are more externally dependent. I empirically validate the mechanism of the model using data on patents, citations, and ICT. Quantitative analysis using the calibrated model illustrates that it is important to account for both technological heterogeneity and the knowledge-diffusion role of ICT to explain recent U.S. trends in productivity dynamics. Chapter 2 (joint with Ufuk Akcigit and Stefanie Stantcheva) studies the effect of top tax rates on "superstar" inventors' international mobility since 1977, using panel data on inventors from the U.S. and European Patent Offices. We find that superstar inventors' location choices are significantly affected by top tax rates. The elasticity of the number of domestic inventors to the net-of-tax rate is between 0.04 and 0.06, while that of foreign inventors is around 1.3. These elasticities are lower for non-superstar inventors and larger for inventors in multinational companies. Chapter 3 studies the impact of non-compete laws (NCL) on the creation of employee spinouts and the implications of this process for aggregate productivity growth. Using patents and inventors data, I identify spinout entrants and document a set of new empirical facts about innovative spinouts and NCL in the U.S. Consistent with these empirical facts, I develop an endogenous growth model to study the implications of spinout formation and NCL for growth. Numerical experiments from the calibrated model illustrate that it is both growth- and welfare improving to abolish existing non-compete restrictions.