A Calculation of the Social Returns to Innovation (WP-20-48)
Benjamin Jones and Lawrence SummersThis 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 the researchers provide an economy-wide calculation that nets out the many spillover margins. They 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, their 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.