In endogenous growth theory, patenting is motivated by profits. However, this paper finds that nonprofit organizations own about two percent of granted patents in the United States. Furthermore, nonprofit patents document important contributions to innovation. Text analysis shows that nonprofit patents make disproportionate contributions to technological categories that have positive externalities, such as medical, green, and basic research. High citations and high novelty relative to impact, as measured by the similarity between past and future patents, suggest that nonprofit patents generate notable spillovers. These contributions not only enhance technological and societal impact but also align closely with the nonprofits’ prosocial missions. 

The nonprofit sector is a small part of the economy that has potentially outsized effects on welfare and has grown in the past 30 years. One important distinction between nonprofit organizations and for-profit firms is that many nonprofits receive charitable contributions. Contributions to nonprofits have risen from 1.2 percent of GDP to around 1.7 percent of GDP, while the income distribution has become more unequal over this period. In a model with non-homothetic preferences for positive charitable contributions and other consumption, increasing GDP produces more than the observed increase in charitable contributions, while increasing inequality slightly decreases charitable contributions.