NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Does Economic Insecurity Affect Employee Innovation?

Shai Bernstein, Timothy McQuade, Richard R. Townsend

NBER Working Paper No. 24011
Issued in November 2017
NBER Program(s):CF, PR

Do household wealth shocks affect employee productivity? We examine this question through the lens of technological innovation, by comparing employees that worked at the same firm and lived in the same metropolitan area, but experienced different housing wealth declines during the 2008 crisis. Following a housing wealth shock, employees are less likely to successfully pursue innovative projects, particularly ones that are high impact, complex, or exploratory in nature. Consistent with employee concerns about financial distress, the effects are more pronounced among those who had little equity in their house before the crisis and among those with fewer outside labor market opportunities. Moreover, run-ups in housing prices before the crisis did not affect employee innovation. The results highlight a “bottom-up” view of innovation, in which individual employees influence the quantity and nature of innovation produced within firms.

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Document Object Identifier (DOI): 10.3386/w24011

 
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