Pay Discrimination and Innovation Productivity: Evidence from the Passage of State-Level Pay Secrecy Laws

We examine the effect of state-level pay secrecy laws—laws that mitigate pay discrimination—on corporate innovation and inventor productivity. We find significant increases in the quantity and quality of patents produced by firms and inventors in states that have passed such laws. Moreover, the effects of this legislation are more pronounced for firms in states with greater existing pay gaps. Further mechanism tests indicate that the passage of pay secrecy laws promotes innovation by motivating inventors (especially discriminated inventors) to exert more effort, enhancing teamwork, and attracting talented discriminated inventors.