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.

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Nicholas Bloom, John Van Reenen and Heidi Williams

10 July 2019     Paper Number CEPDP1634

Download PDF - A toolkit of policies to promote innovation

This CEP discussion paper is published under the centre's Growth programme.

This publication comes under the following theme: R&D and innovation