A policy toolkit to increase research and innovation in the European Union

What research and innovation (R&I) policies should Europe adopt? The world faces a challenge to rebuild after the pandemic, but also faces the same structural slowdown of productivity growth that occurred in the decades before the COVID crisis. We need to have a plan around innovation policy to address the challenge. We show that Europe is less innovative on many dimensions compared to other advanced regions, such as the US and parts of Asia. We review the econometric evidence on R&I policies and argue that there is good evidence for the efficacy of many of them. A mix of R&D subsidies, reinvigorated competition and a big push on expanding the quantity and quality of human capital is needed. These could be bound together around the need for green innovation in order to achieve the mission to radically reduce carbon emissions.