About this event

Publicly funded innovations create social value, but the welfare consequences depend on who captures that value. This paper develops a framework for measuring the incidence of public innovation and applies it to R&D funding from the U.S. Department of Energy. The framework links public innovation to firm-level production allowing us to estimate how the gains generated by public R&D are allocated across workers, firms, and consumers. To address the endogeneity of investment, we develop a political production function approach that isolates funding windfalls: residual variation in congressional appropriations that cannot be predicted by budget requests from the executive branch. We combine these windfalls with measures of firms' exposure to DOE-funded technologies, and we estimate the effects of the DOE's innovations. The estimates indicate that, within firms, the value from public innovation is directed slightly more towards capitalists relative to workers. Incorporating measures of demand, the estimates indicate that the surplus from public innovation is directed more towards consumers than firms. While we use the DOE as a laboratory for studying who captures the returns when governments invest in new technologies, understanding the incidence of public investment in energy technologies is substantively important in and of itself, as it is central to current debates over climate policy, industrial policy, national security, and technological competitiveness.

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This event will take place in SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.