The Impact of Institutions on Innovation
90 Pages Posted: 31 Jul 2016 Last revised: 27 Jun 2019
Date Written: June 25, 2019
We study the impact of inclusive institutions on innovation using novel, hand-collected, county-level data for Imperial Germany. We use the timing and geography of the French occupation of different German regions after the French Revolution of 1789 as an instrument for institutional quality. We find that the number of patents per capita was more than twice as high in counties with the longest occupation as in unoccupied counties. We show that the increase in patenting activity due to better institutions ultimately leads to higher economic growth. Our findings highlight inclusive institutions as a first order determinant of innovation.
Keywords: Innovation, Patents, Institutions, Institutional Reform, Economic Growth
JEL Classification: G38, O31, O43, N13, K40
Suggested Citation: Suggested Citation