Department of Economics

Innovation appears to have a direct impact on broad measures of social mobility. The mechanism thought to be behind this is Joseph Schumpeter’s theory of creative destruction, where new entrant firms develop more sophisticated technologies in an incessant process of industrial turnover. Thus, the gains in social mobility are dependent on the success of new entrant firms.We hypothesize that in regions with dense concentrations of venture capital funding, new entrant firms will be more successful, and this will amplify the effect that innovation has on mobility. This study contributes meaningful nuance to the argument that innovation causes increases in mobility by showing that the effect may vary in magnitude depending on influencing factors such as venture investment.