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CEP discussion paper
A toolkit of policies to promote innovation
Nicholas Bloom, John Van Reenen and Heidi Williams
July 2019
Paper No' CEPDP1634:
Full Paper (pdf)

JEL Classification: O31; O32

Tags: innovation; r&d; intellectual property; tax; competition; growth

Economic theory suggests that market economies are likely to under-provide innovation due to the public good nature of knowledge. Empirical evidence from the US and other advanced economies supports this idea. We summarize the pros and cons of different policy instruments for promoting innovation and provide a basic “toolkit” describing which policies are most effective, based on our reading of the evidence. In the short-run, R&D tax credits or direct public funding seem the most productive, but in the longer-run increasing the supply of human capital (e.g. relaxing immigration rules or expanding university STEM admissions) are likely more effective.