Aggregate Implications of Innovation Policy
101 Pages Posted: 8 Oct 2011 Last revised: 20 Apr 2023
Date Written: October 2011
Abstract
We examine the quantitative impact of policy-induced changes in innovative investment by firms on growth in aggregate productivity and output in a model that nests several of the canonical models in the literature. We isolate two statistics, the impact elasticity of aggregate productivity growth with respect to an increase in aggregate innovative investment and the degree of intertemporal knowledge spillovers in research, that play a key role in shaping the model’s predicted dynamic response of aggregate productivity, output, and welfare to a policy-induced change in the innovation intensity of the economy. Given estimates of these statistics, we find that there is only modest scope for increasing aggregate productivity and output over a 20-year horizon with uniform subsidies to firms’ investments in innovation of a reasonable magnitude, but the welfare gains from such a subsidy may be substantial.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Theory of Optimal Capital Taxation
By Thomas Piketty and Emmanuel Saez
-
A Theory of Optimal Capital Taxation
By Thomas Piketty and Emmanuel Saez
-
A Theory of Optimal Inheritance Taxation
By Thomas Piketty and Emmanuel Saez
-
By Thomas Piketty and Emmanuel Saez
-
De Gustibus Non Est Taxandum: Heterogeneity in Preferences and Optimal Redistribution
-
Non-Linear Effects of Taxation on Growth
By Nir Jaimovich and Sergio T. Rebelo
-
The Promise of Positive Optimal Taxation: Normative Diversity and a Role for Equal Sacrifice
-
Capital is Back: Wealth-Income Ratios in Rich Countries, 1700-2010
By Thomas Piketty and Gabriel Zucman