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Institute for Workplace Studies-----------------Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor--------------------Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Congressional Budget Office (CBO)

 

FEDERAL POLICIES AND INNOVATION [17 November 2014]

http://www.cbo.gov/publication/49487?

or

http://www.cbo.gov/sites/default/files/cbofiles/attachments/49487-Innovation.pdf

[full-text, 46 pages]

 

Innovation is a central driver of economic growth in the United States. Workers become more productive when they can make use of improved equipment and processes, and consumers benefit when new goods and services become available or when existing ones become better or cheaper—although the transition can be disruptive to established firms and workers as new products and processes supersede old ones. Looking ahead, innovation will continue to be important for economic growth, in part because the supply of workers to the economy is expected to increase at a much slower rate in the future.

 

Innovation produces some benefits for society from which individual innovators are not able to profit, and, as a result, those innovators tend to underinvest in such activity. Policymakers endeavor to promote innovation to compensate for that underinvestment. The federal government influences innovation through two broad channels: spending and tax policies, and the legal and regulatory systems. In this report, the Congressional Budget Office (CBO) examines the effects on innovation of existing policies and systems and the possible effects of a variety of proposals for changing those policies and systems.

 

Contents

Summary 1

 

1 Effects of Innovation on the Economy 5

Innovation and Economic Growth 5

The Impact of Innovation on Firms and Workers 6

 

2 Using Additional Federal Resources to Spur Innovation 9

Funding for Research and Development 9

Support for Education 16

Tax Treatment of Private Investment Related to Innovation 22

Federal Loan and Loan Guarantee Programs That Support Innovation 26

 

3 Altering the Legal and Regulatory Framework to Spur Innovation 29

Immigration of Highly Skilled Workers 29

The Patent System 32

Regulatory Goals and Tools 38

 

List of Tables and Figures 41

About This Document 42

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