What is it about?
Motivated by a theoretical model, we examine for 43 democracies whether it is policy or policy uncertainty that affects technological innovation more. We find that for most democracies technological innovation does not change when the political regime changes. Innovation, however, drops dramatically in the year of the election, especially if the election is close. So policy uncertainty matters more than policy.
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Why is it important?
The paper is important because it shows that in mature democracies, when it comes to technological innovation, it really does not matter who is in power. It matters more when there is uncertainty about who will be in power. Political compromise encourages innovation. The paper was featured in the Washington Post on February 19, 2014.
Perspectives
It was fun writing this paper with coauthors who knew more about innovation than I did, and who I could convince that politics was important in their field as well.
Professor Utpal Bhattacharya
Hong Kong University of Science and Technology
Read the Original
This page is a summary of: What Affects Innovation More: Policy or Policy Uncertainty?, Journal of Financial and Quantitative Analysis, August 2017, Cambridge University Press,
DOI: 10.1017/s0022109017000540.
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