UC San Diego

The aggregate response of labor productivity to changes in technology and government spending has been analyzed and documented by many economists. However, much less is known about the response of regional and firm-level labor productivity. Therefore, the first chapter of this dissertation examines the regional effect of an aggregate technology shock. The second and third chapters use firm- level and regional data to explore how labor productivity and technology react to changes in government spending through military contracting. These regional and firm- level responses can help to increase our understanding of aggregate economic fluctuations. Chapter 1 of this dissertation estimates the response of state-level labor productivity to a technology shock as measured by aggregate utility patent applications. The state-level responses, estimated with a vector autoregression, have considerable spatial variation. In some states, the responses are significantly positive shortly after the shock. However, in other states the productivity responses are initially negative followed by an eventual positive response. To explain why the U.S. states respond differently, the responses are regressed against a variety of state-level demographic, economic, and policy factors. These cross-sectional regression results indicate that high-skilled labor, density, and industrial specialization are important shortly after a technology shock. Chapter 2, which is co-authored with Lone E. Christiansen, examines whether changes in government spending, through military prime contract awards, leads to the development of new technology and analyzes the effects on firm-level productivity. Though it is most often assumed that government spending does not affect technological progress, the results from this chapter show that indeed firm-level patenting, a proxy for technology, increases in response to a military contract award. Firm-level sales per employed worker, and research and development are also shown to respond positively. Chapter 3, co-authored with Lone E. Christiansen, follows the approach in Chapter 2 but examines the effects of military prime contracts at the regional level. The analysis shows that at the regional level, military prime contracts lead to the development of new technology. However, labor productivity at the regional level is only affected insignificantly