The Public Origins of American Innovation

Andrea Gazzani, Joseba Martinez, Filippo Natoli and Paolo Surico

No 20788, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the macroeconomic effects of government-funded and privately funded innovation on postwar U.S. productivity and economic growth. Using newly digitized data that allow us to distinguish innovations by funding source and ownership, we document systematic differences in how public and private innovation translate into aggregate outcomes. Government-funded but privately owned patents—though accounting for only about 2% of total patenting—explain roughly 20% of medium-term fluctuations in total factor productivity and GDP growth and are associated with strong spillovers to business-sector R&D and investment. Privately funded patents also contribute to aggregate fluctuations, but with smaller effects, while publicly owned patents display muted average impacts despite being disproportionately represented among highly disruptive innovations, particularly in health and biotechnology. Across federal agencies, innovations funded by the NIH and NSF exhibit the strongest links to subsequent productivity growth, and research institutes and universities outperform for-profit firms in converting public funding into aggregate gains. Taken together, our results highlight how the institutional design of public support for innovation shapes medium-term productivity dynamics and plays a central role in sustaining U.S. economic growth.

JEL-codes: E22 E32 O41 (search for similar items in EconPapers)
Date: 2025-10
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