-
Kakhbod, A., L. Kogan, P. Li, and D. Papanikolaou, 2026, "Measuring Creative Destruction."
Download.
SSRN.
Winner, 2025 Crowell Memorial Prize (first prize), PanAgora Asset Management.
We construct a firm-level measure of creative destruction from the similarity between a firm's 10K technology description and other firms' patented innovations. Motivated by a simple model, we identify two channels of displacement, one in the product market and one through the firm's production technologies, and build a composite measure summarizing both. Higher composite displacement is associated with significant declines in firm profits, revenue, employment, and capital. We find no evidence that industry-level creative destruction raises subsequent growth, but we do see significant reallocation: industries with more creative destruction experience greater dispersion in firm growth rates.
-
Green, B., L. Kogan, D. Papanikolaou, and L. Schmidt, 2026, "Winners and Losers: Competition, Creative Destruction, and Labor Income Risk."
Download.
Using U.S. administrative data, we find that technology-driven creative destruction in the product market passes through to worker earnings. The passthrough to incumbent worker earnings is both asymmetric and concentrated: profit drops from rival innovations lead to proportionally greater earning declines and changes in the likelihood of job destruction than profit gains from their own firm's innovations, while top workers are significantly more exposed than the average worker. We develop an endogenous-growth model with monopsonistic labor markets and worker heterogeneity that replicates this asymmetry and the distribution of earnings risk. Creative destruction exposes high-income workers to concentrated downside risk while increasing upward mobility for lower-income workers, shaping the welfare consequences of innovation policy. (This paper subsumes the earlier paper "Technological Innovation and Labor Income Risk" (also circulated as "Technological Innovation and the Distribution of Labor Income Growth"), by Kogan, Papanikolaou, Schmidt, and Song.)
-
Huang, Q., L. Kogan, and D. Papanikolaou, 2026, "Inflation and Innovation."
Download.
Innovation raises productivity, yet it can also raise inflation when markets are incomplete. Exploiting state-level R&D tax credits as an instrument, we find that innovation raises local inflation, primarily in non-tradables. We rationalize this in a multi-region model where displacive innovation shocks reallocate output among agents; the concentrated gains from innovation raise local prices even as productivity rises. Non-innovative households bear the costs of innovation in the form of higher local prices. The calibrated model implies that an innovation shock raising output by 1 percent reduces welfare by approximately 7 percent. The model generates a realistic equity and value premium with modest risk aversion. Since local growth stocks hedge local inflation, households are willing to tilt their portfolios toward local growth stocks despite their low average returns. (Previously circulated as "Productivity Shocks and Inflation in Incomplete Markets.")
-
Cen, X., W. Dou, L. Kogan, and W. Wu, 2026, "Fund Flows and Income Risk of Fund Managers."
Download. SSRN.
We construct the first large-scale dataset linking the compensation and career outcomes of U.S. active equity mutual fund managers to administrative earnings records from the U.S. Census Bureau's LEHD data. Compensation is anchored primarily by fund scale: the elasticity of pay with respect to both AUM and fee revenue is about 0.18. Controlling for the mechanical effect through AUM, return performance affects pay mainly through bonuses rather than base pay. This distinction is important because the median bonus-to-pay ratio is 34%, which helps explain why return performance has limited additional explanatory power for total pay. Bonus shares are higher for managers who are more senior, more established, oversee larger funds, or have higher Morningstar ratings. Fund flows also matter beyond their effect through AUM: they affect compensation and strongly predict career outcomes. Large outflows raise the probability of turnover with a major compensation decline by about 4 percentage points. At the fund-family level, return performance and fund flows raise individual managers' base pay, but not bonuses.
-
Kogan, L., J. Li, H. Zhang, and Y. Zhu, 2026, "Operating Leverage and Risk Premium." Coming soon.
Recipient of the 2023 CFRI & CIRF–Pacific-Basin Finance Journal Research Excellence Award (Finance Research) at the CFRI & CIRF Joint Conference.
Previously circulated as "Operating Leverage and Asset Pricing Anomalies."
-
Cao, D., B. Falk, L. Kogan, and G. Tsoukalas, 2025, "A Structural Model of Automated Market Making."
Download.
Automated market makers (AMMs) process billions in annual transactions, yet most rely on fixed fee schedules that stand in contrast to microstructure theory, which prescribes volatility-sensitive spreads. To assess whether this theory extends to AMMs, we develop and estimate a structural model of an AMM. We show that fixed fees are inefficient and characterize the optimal volatility-sensitive fee schedule. Testing on ETH-USDC data shows that, even with noisy volatility forecasts, adaptive fees outperform fixed fees, increasing the annual fee revenue by 9-44%, and AMM liquidity supply by 2-10%.
-
Huang, Q., L. Kogan, and D. Papanikolaou, 2025, "Tech Dollars: Technological Innovation and Exchange Rates."
Download.
SSRN.
Winner, 2025 WRDS Outstanding Paper Award in Financial Institutions, MFA. Winner, 2025 China International Conference in Finance XiYue Best Paper Award.
We document a positive link between U.S. innovation, dollar appreciation, and foreign capital inflows. To explain these patterns, we develop a general equilibrium model in which innovation-driven productivity gains accrue disproportionately to entrepreneurs. The calibrated version of the model replicates the joint dynamics of the dollar, equity returns, inequality, consumption and output growth, highlighting a new channel between innovation, exchange rates, and global capital flows. In our model, foreign investors invest in U.S. technology stocks to share the gains of U.S. innovation; the dollar appreciates not because it is a safe asset but as a claim on U.S. innovation.
-
Kogan, L., D. Papanikolaou, L. Schmidt, and B. Seegmiller, 2024, "Technology and Labor Displacement: Evidence from Linking Patents with Worker-Level Data."
Download.
We develop measures of labor-saving and labor-augmenting technology exposure using textual analysis of patents and job tasks. Using US administrative data, we show that exposure to labor-saving technologies negatively affects the earnings of exposed workers. This negative effect is pervasive across both blue- and white-collar workers and across workers of different ages or earnings relative to their peers. In contrast, labor-augmenting technologies have a heterogeneous impact on exposed workers. While the wage bill paid to affected groups rises, this increase is driven primarily by an increase in employment, while earnings rise for new entrants but decline for incumbent workers. This decline is primarily present among white-collar, older, and higher-paid workers, highlighting the importance of vintage-specific human capital. Last, we find positive spillovers of both types of innovation at the industry level, benefiting other workers in the same industry who are not directly exposed to these innovations.
-
Kogan, L., J. Li, and X. Qiao, 2023, "Asset Growth Effect and Q Theory of Investment."
Download. SSRN.
The recent linear factor models (e.g., Fama and French (2015) and Hou, Xue, and Zhang (2015)) use total asset growth as the measure of investment, largely due to its stronger return predictive power than its components such as the long-term and current asset growths. We offer an explanation of the latter finding by extending the standard q theory of investment into a two-capital setup in which firms use both long-term and current asset as production inputs. We uncover a novel asset imbalance channel which creates negative comovement between current and long-term asset growths that are unrelated to discount rate. This comovement is muted in the total asset growth, giving rise to its stronger return prediction. Once controlling for this comovement, the return predictive power of current and long-term asset growths substantially improves. Furthermore, we document strong evidences for the model's prediction that the asset growth effects are more prominent among firms with low asset imbalance. Our results support the q theory based explanation for the asset growth effect.