A Calculation of the Social Returns to Innovation
This paper estimates the social returns to investments in innovation. The disparate spillovers associated with innovation, including imitation, business stealing, and intertemporal spillovers, have made calculations of the social returns difficult. Here we provide an economy-wide calculation that nets out the many spillover margins. We further assess the role of capital investment, diffusion delays, learning-by-doing, productivity mismeasurement, health outcomes, and international spillovers in assessing the average social returns. Overall, our estimates suggest that the social returns are very large. Even under conservative assumptions, innovation efforts produce social benefits that are many multiples of the investment costs.
We thank Pierre Azoulay, Stefan Bechtold, Dietmar Harhoff, Chad Jones, Monika Schnitzer, Scott Stern, Manuel Trajtenberg, Martin Watzinger, seminar participants at ETH Zurich, the Max Planck Institute for Innovation and Competition, and conference participants at the NBER Role of Innovation and Entrepreneurship in Economic Growth conference for helpful comments. We gratefully acknowledge support from the Alfred
P. Sloan Foundation under award G-2015-14014 and the AFOSR Minerva award FA9550-19-1-0354. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.