Does LGBT inclusion promote national innovative capacity?

This paper empirically investigates the extent to which the social inclusion of lesbian, gay, bisexual and transgender (LGBT) people matters for technological innovation. The central hypothesis, in particular, postulates that the acceptability of LGBT individuals helps foster human capital skills, thus strengthening innovation. The reverse holds true in societies where significant discrimination against homosexuality prevails. To test this proposition, I perform empirical analysis using data for a world sample of countries. The results indicate that social tolerance toward homosexuality is positively correlated with the economic complexity index, a novel measure of innovation. To achieve causal inference, I conduct several falsification exercises, none of which alters the baseline findings. Further, individual-level analysis, based on data from the World Values Survey, lends strong credence to the international evidence. I also find that LBGT inclusion exerts a positive influence on human capital skills, which is a potential mechanism explaining the baseline findings.