Modern growth theory puts invention on the center stage. Inventions are created by individuals, raising the question of whether we can increase the number of inventors. To answer this question, we study the causal effect of MSc engineering education on invention, using data on U.S. patents’ Finnish inventors and the distance to the nearest technical university as an instrument. We find a positive effect of engineering education on the propensity to patent and a negative OLS bias. Our counterfactual calculation suggests that establishing three new technical universities resulted in a 20% increase in the number of USPTO patents by Finnish inventors.

A key input to inventive activity is human capital. Hence, it is important to understand the monetary incentives of inventors. We estimate the effect of patented inventions on individual earnings by linking data on U.S. patents and their inventors to Finnish employer-employee data. Returns are heterogeneous: inventors get a temporary reward of 3% of annual earnings for a patent grant and for highly cited patents a longer-lasting premium of 30% in earnings three years later. Similar medium-term premium's accrue to inventors who initially hold the patent rights, although they forgo earnings at the time of the grant.