13  See, for example, Aghion et al. (2008) and Mannasoo and Merikull (2011). 14  This is the heart of the so-called “cleansing effect” of a recession: a recession stimulates innovation activity and rectifies inefficiencies in the economy.
The word “cleansing effect” sometimes refers exclusively to efficiency gains from the exit of inefficient firms, but the innovation-induced mechanism should properly be taken into account. 15  Social return has the elements of both dynamic scale effect and learning effect.