The data show that a one unit increase in the number of patents in a state leads to a $129,793 increase in Gross Domestic Product (GDP) in that state. The patent data come from the Patent Examination Research Dataset from the United States Patent and Trademark Office (USPTO). The GDP and employment figures by state come from the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA).

The first step in this analysis to determine how many patents were listed in 2017. I used the correspondence address file, which documents the name and address of the entity with which the USPTO is supposed to respond, to determine the number of patents in each state. I sum the number of addresses per state and use this as my “Number of Patents” variable.

The next step is to merge the Number of Patents data with state GDP and employment figures. I use “state” to link the USPTO data with the BLS and BEA data. I then run a regression of GDP on Number of Patents and control for employment. A regression predicts how much a one unit increase in Number of Patents impacts the state GDP. I control for employment by state because employment can impact both the Number of Patents and the state GDP.

Figure 1, below, shows that a one unit increase in Number of Patents increases state GDP by $129793.20. Furthermore, this relationship is statistically significant. This means that this finding is unlikely to be due to chance.

This finding shows that innovation can help the local state economy significantly. This is an intuitive result, but this analysis puts a number to the intuition and shows how much of an impact one patent has on a state’s GDP.

Source: https://www.uspto.gov/learning-and-resources/electronic-data-products/patent-examination-research-dataset-public-pair , https://www.bls.gov/web/laus/statewide_otm_oty_change.htm , https://www.bea.gov/data/gdp/gdp-state