Final Report Summary - HISKNOWL (Using Historical Quasi-Experiments to Understand the Knowledge Economy) The funding of the ERC has enabled me to study questions at the intersection of economics of innovation, economic history, and labour economics. In particular, the project combines the collection individual level micro-data on high-skilled individuals from archival sources with the use of modern micro-econometric techniques to understand the driving forces of scientific productivity, the production and allocation of talent, and the cost of discrimination against certain groups. In one sub-project I show that WWI and the subsequent boycott against Central scientists severely interrupted international scientific cooperation. After 1914, citations to recent research from abroad decreased and papers produced in the warring scientific camps became less similar (evaluated by Latent Semantic Analysis), suggesting a reduction in international knowledge flows. Reduced international scientific cooperation led to a decline in the production of basic science and its application in new technology. Specifically, I compare productivity changes for scientists who relied on frontier research from abroad, to changes for scientists who relied on frontier research from home. After 1914, scientists who relied on frontier research from abroad published fewer papers in top scientific journals, produced less Nobel Prize-nominated research, introduced fewer novel scientific words, and introduced fewer novel words that appeared in the text of subsequent patent grants. The productivity of scientists who relied on top 1% research declined twice as much as the productivity of scientists who relied on top 3% research. Furthermore, highly prolific scientists experienced the starkest absolute productivity declines. These findings highlight the importance of international scientific collaboration and indicate that access to the very best research is key for scientific and technological progress.In another sub-project I study the cost of discrimination for society. When discriminatory attitudes influence the decisions of governments and firms, highly qualified individuals from discriminated groups are often excluded from important positions in the economy. This research quantifies the economic losses that can result from such discrimination at the top. Specifically, we investigate how the forced removal of managers with Jewish origins in Nazi Germany affected large firms. The loss of Jewish managers significantly reduced the stock prices of affected firms, for at least 10 years after the Nazis came to power. We find particularly strong stock price reductions for firms where the removal of the Jewish managers led to large decreases in managerial connections to other firms and in the number of university-educated managers. Dividend payments and returns on assets also declined. A back-of-the-envelope calculation suggests that the aggregate market valuation of firms listed in Berlin fell by 1.8 percent of German GNP. The findings imply that discrimination can lead to first-order economic losses.
