A toolkit of policies to promote innovation
Economic theory suggests that market economies are likely to under-provide innovation due to the public good nature of knowledge. Empirical evidence from the US 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, based on our reading of the evidence. In the short-run, R&D tax credits or direct public funding seem the most productive, but in the longer-run increasing the supply of human capital (e.g. relaxing immigration rules or expanding university STEM admissions) are likely more effective.
10 July 2019 Paper Number CEPDP1634
This CEP discussion paper is published under the centre's Growth programme.
This publication comes under the following theme: R&D and innovation