The Public Origins of American Innovation

Department of Economics and Decision Sciences

Speaker : Paolo Surico (LBS)

Room : T-020

Abstract :

We study the macroeconomic effects of government-funded and privately funded inno-vation on postwar U.S. productivity and economic growth. Using newly digitized datathat allow us to distinguish innovations by funding source and ownership, we documentsystematic differences in how public and private innovation translate into aggregateoutcomes. Government-funded but privately owned patents—though accounting foronly about 2% of total patenting—explain roughly 20% of medium-term fluctuationsin total factor productivity and GDP growth and are associated with strong spilloversto business-sector R&D and investment. Privately funded patents also contribute toaggregate fluctuations, but with smaller effects, while publicly owned patents displaymuted average impacts despite being disproportionately represented among highly dis-ruptive innovations, particularly in health and biotechnology. Across federal agencies,innovations funded by the NIH and NSF exhibit the strongest links to subsequent pro-ductivity growth, and research institutes and universities outperform for-profit firmsin converting public funding into aggregate gains. Taken together, our results high-light how the institutional design of public support for innovation shapes medium-termproductivity dynamics and plays a central role in sustaining U.S. economic growth.

Joint work with : Andrea Gazzani, Joseba Martinez and Filippo Natoli