Max Planck Institute for Innovation and Competition, Munich, Room 313
This paper estimates the social returns to investments in innovation. The spillovers associated with innovation, including imitation, business stealing, and intertemporal spillovers, have made calculations of the social returns difficult. Here we deploy the core ideas of economic growth to provide an economy-wide, average estimate that nets out the many spillover margins. We further assess the role of diffusion delays, capital investment, 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, $1 invested in innovation efforts produces at least $5 of benefits on average.
Contact Person: Rainer Widmann