The Spatial Mismatch between Innovation and Joblessness

Abstract

American technological creativity is geographically concentrated in areas that are generally distant from the country’s most persistent pockets of joblessness. Could a more even spatial distribution of innovation reduce American joblessness? Could federal policies disperse innovation without significant costs? If research funding is already maximizing knowledge production, then spatial reallocation of that funding will reduce America’s overall innovation unless that reallocation comes with greater spending. Without any spatial reallocation, the primarily inventive parts of innovation policy, such as National Institutes of Health grants, can potentially aid underperforming areas by targeting the problems of those areas, such as widespread disability. The educational aspects of innovation policy, such as Pell Grants, work-study, vocational training, and federal overhead reimbursement on grants, currently have multiple objectives and could focus more on employability in distressed areas. Lifting the cap on H-1B visas in poorer places could attract outside human capital to those places. Geographically targeted entrepreneurship policies, such as eliminating the barriers to new business formation near universities and in distressed places, could potentially enhance employment growth in those regions. Spatially targeted employment subsidies will increase the returns to labor-intensive innovation in depressed areas, but we need to know more about how much innovation will respond to such subsidies.