Disruptive Innovation and Interregional Inequality in the United States

Around 1980, interregional income inequality in the United States began to grow, as it did in a wide range of other countries. In the U.S., some people moved to opportunity, newly concentrated in a limited subset of urbanized locations, but overall migration rates shrunk. As a consequence, many Americans have become stuck in places that offer few opportunities. This shift is economically important, and it also appears to be related to the recent upsurge in populist politics. And yet divergence is not a constant or necessary feature of the space-economy. Indeed, it strongly contrasts with patterns experienced during the mid-20th century, where people were more mobile and gaps between places diminished. And partly because many of our core theories of urban growth and change are premised on the record of this earlier period, we face real challenges to explain what we see today, and to design policies that address the fallout. All of this points to an urgent need to retheorize urban growth. Linking detailed information from the universe of USPTO patents to long-run local labor market microdata between 1940 and 2010, this paper provides evidence in support of a new, ‘structural’ theory of regional development. This theory proposes regular, wavelike alternations between periods of interregional convergence and divergence. The evidence is consistent with the idea that alternations are regulated by major, disruptive technology shocks – or industrial revolutions.