A Calculation of the Social Returns to Innovation

Benjamin F. Jones, Lawrence H. Summers

NBER Working Paper No. 27863
Issued in September 2020
NBER Program(s):Economic Fluctuations and Growth, Productivity, Innovation, and Entrepreneurship

This paper estimates the social returns to investments in innovation. The disparate spillovers associated with innovation, including imitation, business stealing, and intertemporal spillovers, have made calculations of the social returns difficult. Here we provide an economy-wide calculation that nets out the many spillover margins. We further assess the role of capital investment, diffusion delays, learning-by-doing, 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, innovation efforts produce social benefits that are many multiples of the investment costs.

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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w27863

Forthcoming: A Calculation of the Social Returns to Innovation, Benjamin F. Jones, Lawrence H. Summers. in Innovation and Public Policy, Goolsbee and Jones. 2020