A Toolkit of Policies to Promote Innovation
Journal of Economic Perspectives
vol. 33,
no. 3, Summer 2019
(pp. 163-84)
(Complimentary)
Abstract
Economic theory suggests that market economies are likely to underprovide innovation because of the public good nature of knowledge. Empirical evidence from the United States and other advanced economies supports this idea. We summarize the pros and cons of different policy instruments for promoting innovation and provide a basic "toolkit" describing which policies are most effective according to our reading of the evidence. In the short run, R&D tax credits and direct public funding seem the most productive, but in the longer run, increasing the supply of human capital (for example, relaxing immigration rules or expanding university STEM admissions) is likely more effective.Citation
Bloom, Nicholas, John Van Reenen, and Heidi Williams. 2019. "A Toolkit of Policies to Promote Innovation." Journal of Economic Perspectives, 33 (3): 163-84. DOI: 10.1257/jep.33.3.163Additional Materials
JEL Classification
- H41 Public Goods
- I23 Higher Education; Research Institutions
- O31 Innovation and Invention: Processes and Incentives
- O38 Technological Change: Government Policy
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