Innovation and growth: supply and demand factors in the recent US expansion

It is widely held that the social-economic context of the US, characterised by labour market flexibility and deregulation of product and capital markets, lies at the basis of the innovative capacity displayed by the country's productive system in the 1990s, thus accounting for the growth differential with Europe. Starting from a different interpretative model of innovation and growth, the paper focuses on both supply (institutional and technological) and demand factors. It is argued that, when their interaction is taken into account, there is no strong evidence that more deregulated labour and product markets are among the factors allowing for US growth. In accordance with the view that there is no single road to innovation and growth, this leaves room for the exploration and implementation of policies that might reconcile innovation and growth with safeguards such as those provided by Europe's social institutions.