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Recent Research: Exposure to innovation more important than financial incentives in increasing the number of inventors, researchers find

February 14, 2019

Recent research revealed that exposure to innovation (e.g., mentorship program and immersive K-12 STEM education experience) during childhood and young adulthood has a greater effect on the decision to pursue careers in innovation than financial incentives. Researchers Alexander M. Bell, Raj Chetty, and their co-authors developed a model to analyze the impact of several factors on inventor career choices. After conducting an analysis using the model, the authors predict that financial incentives, such as top income tax reductions, have limited potential to increase aggregate innovation because they only affect individuals who are exposed to innovation and have no impact on the decisions of star inventors, who matter the most for aggregate innovation.

In the report, Do Tax Cuts Produce More Einsteins?, the authors contend that these results hold regardless of whether the private returns to innovation are known at the time of career choice. In contrast, initiatives intended to increase exposure to innovation may draw individuals who produce high-impact inventions into the innovation pipeline.

In the study, the authors examined two types of exposure. The first type focused on children receiving direct exposure to innovation via a mentorship program or an immersive K-12 STEM education experience such as a coding class. Second, they looked at exposure via geographic proximity to innovation; individuals that grew up in communities with higher rates of innovation were more likely to enter the innovation pipelines.

The study finds that private returns to innovation are extremely skewed — with the top 1 percent of inventors collecting more than 22 percent of total inventors' income — and are highly correlated with the impact of their innovations, as measured by citations.

The authors also contend that inventors tend to have their most impactful innovations around age 40 and their incomes rise rapidly just before they have high-impact patents. This element of the study is based upon data from 1.2 million inventors whose patent records are linked to tax records in the United States.

recent research, innovation