2021/41 | LEM Working Paper Series | ||||||||||||||||
The direction of technical change in AI and the trajectory effects of government funding |
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Martina Iori, Arianna Martinelli and Andrea Mina |
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Keywords | |||||||||||||||||
R&D; Technical change; Government subsidies; Technology policy;
General purpose technology.
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JEL Classifications | |||||||||||||||||
O31, O33, O38, D85
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Abstract | |||||||||||||||||
Government funding of innovation can have a significant impact not only on the rate of technical
change, but also on its direction. In this paper, we examine the role that government grants and
government departments played in the development of artificial intelligence (AI), an emergent
general purpose technology with the potential to revolutionize many aspects of the economy and
society. We analyze all AI patents filed at the US Patent and Trademark Office and develop
network measures that capture each patent’s influence on all possible sequences of follow-on
innovation. By identifying the effect of patents on technological trajectories, we are able to
account for the long-term cumulative impact of new knowledge that is not captured by standard
patent citation measures. We show that patents funded by government grants, but above all
patents filed by federal agencies and state departments, profoundly influenced the development
of AI. These long-term effects were especially significant in early phases, and weakened over
time as private incentives took over. These results are robust to alternative specifications and
controlling for endogeneity.
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