Knowledge Spillovers and Local Outcomes: An Existence Proof from the Establishment of the National Labs

Abstract

We study the establishment of U.S. National Laboratories in the 1940s–1950s to estimate local spillovers from public research infrastructure. This setting allows us to causally identify such spillovers, for two reasons: 1) Lab sites were chosen largely for security and political reasons, rather than existing or potential innovative capability and 2) We identify runner-up locations using archival sources. We find several types of knowledge spillovers: Compared to control counties, Lab counties experience large and persistent increases in patenting by non-lab inventors; non-lab patents in the same county shift toward laboratories’ research fields and cite laboratory patents more frequently. Using newly digitized county data from 1936–1970, we find sustained increases in retail sales and household income. Linked 1940–1950 Census records show wage gains for pre-existing residents who remain in lab counties, with larger effects for college-educated workers. We find that cohorts exposed to laboratory establishment during school-age years attained more education, consistent with a human-capital channel. Spillovers arise despite extensive secrecy around early nuclear research, suggesting that co-location with public R&D can generate sizable local benefits even under restricted information flows. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org .