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Basic and Applied Research: A Welfare Analysis

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  • Kunihiko Konishi

    (Kyoto University)

Abstract

This study constructs a variety expansion growth model that integrates basic research to analyse its effects on household welfare. In our model, the research sector consists of applied and basic research components. The former creates blueprints and expands the variety of goods available for consumption, whereas the latter adds to the public-knowledge stock. The analysis yields several results. First, the steady-state welfare-maximizing level of basic research is below the steady-state growth-maximizing level. Second, a consideration of the welfare effects during the transition path suggests that marginal changes in the level of basic research can increase household welfare even at its steady-state welfare-maximizing level. Third, by using data from Japan, we calibrate the model and find that an increase in basic research spending raises household welfare.

Suggested Citation

  • Kunihiko Konishi, 2018. "Basic and Applied Research: A Welfare Analysis," The Japanese Economic Review, Springer, vol. 69(4), pages 414-437, December.
    • Handle: RePEc:spr:jecrev:v:69:y:2018:i:4:d:10.1111_jere.12154
    DOI: 10.1111/jere.12154
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    References listed on IDEAS

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    1. Konishi, Kunihiko, 2017. "Public Research Spending In An Endogenous Growth Model," Macroeconomic Dynamics, Cambridge University Press, vol. 21(4), pages 862-888, June.
    2. Gersbach, Hans & Sorger, Gerhard & Amon, Christian, 2018. "Hierarchical growth: Basic and applied research," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 434-459.
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    Cited by:

    1. Furukawa, Yuichi & Lai, Tat-kei & Sato, Kenji, 2019. "Love of Novelty: A Source of Innovation-Based Growth... or Underdevelopment Traps?," MPRA Paper 92915, University Library of Munich, Germany.

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    More about this item

    Keywords

    H41; O31; O41;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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