This dissertation encompasses two chapters. The first chapter examines the spatial distribution of inventors in the U.S. economy and its implications for aggregate innovation and economic growth. It highlights the pronounced geographical concentration of innovative activity within select U.S. innovation hubs. Utilizing patent citation data, significant heterogeneity and imperfections in knowledge spillovers across states are identified. In light of these findings, a novel endogenous growth model is developed, featuring mobile inventors and workers between states. The model is equipped with an exogenous knowledge network that captures the dynamics of idea exchange across locations. In the model, inventors do not internalize the effect of their location choice on the diffusion of ideas to the rest of the economy, necessitating a place-based R&D subsidy policy to maximize the potential of knowledge linkages. Location specific amenities and exogenous research productivities are recovered by matching observed inventor and worker allocations in space. The knowledge diffusion network is estimated from patent citation data, and optimal policy is analyzed by a set of counterfactual exercises. The policy implies a greater concentration of inventors in established innovation hubs, enhancing welfare by 1.8% in consumption equivalent terms and elevating the economy's growth rate by 0.14 percentage points. The second chapter examines the slow economic convergence of East Germany after it is unified with West Germany. Even 30 years after the reunification, regions in East Germany (the former socialist GDR) live in considerably different economic conditions, with the average GDP per capita still about 20 percent below the average level in the West German regions. In this paper, we explore the obstacles that impeded full convergence despite massive support to the East with a particular focus on technological differences and firm behavior. In the immediate aftermath of the reunification, production in the former GDR exhibited a rapid catch-up with the West with a pick-up in labor productivity. But the convergence then lost steam quickly with a stark difference between East and West German firms' product qualities persisting ever since. We build a quantitative model of innovation, competition, and regional integration that is able to replicate these dynamics and provides a suitable setting to evaluate alternative policies that could have altered these dynamics. We find that delaying the reunification---i.e., opening up to competition from the West---would not help the Eastern firms to build up capacity. Sustained support for R&D in the East from the West could have helped shrink persistent gaps in product quality and income, although more effective alternatives appear to be subsidies to Western firms via either R&D support, with knowledge spillovers lifting also Eastern technology, or direct income support to facilitate technology transfer to the East via licensing.