This paper shows that taxes affect the international location decisions of the best “superstar” inventors. Higher tax rates lead to a significantly lower share of superstar inventors remaining in their home country and a lower share of foreign superstar inventors who move to the country. This may have significant fiscal and innovation costs for a country that should be taken into account when setting tax policy.
The introduction of new production processes can have dramatic effects on aggregate productivity within an industry. This research explores the impact of the major technological innovation of the minimill on the US steel industry, analyzing detailed producer-level data on prices and production over a 40-year period. The study illustrates how technology can drive reallocation: the market share of plants using minimills rose significantly, but the older technology of vertically integrated production was not entirely displaced. Instead, less productive vertically integrated plants were driven out of the industry and output was reallocated to more efficient producers.