Pay Transparency and Inventor Productivity: Evidence From State‐Level Pay Secrecy Laws

Abstract We examine the role of pay transparency in inventor productivity by exploiting the staggered adoption of state‐level pay secrecy laws, which enhance pay transparency in the workplace. We find a significant increase in inventor productivity of firms located in states that have passed such laws relative to firms elsewhere. This relation is more pronounced for firms in states with lower levels of pre‐existing pay transparency. We further show that pay secrecy laws promote inventor productivity by motivating inventors—especially minority inventors—to exert more effort, enhancing the diversity of inventor teams, and encouraging all inventors to pursue promotions.