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Basic Research, Openness, and Convergence

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Abstract

We study a model where economic growth is fueled by public basic-research investment and the importation of leading technology from foreign countries. In each period, the government chooses the amount of basic research, balancing the cost and benefits of stimulating growth through both channels. We establish the existence of steady states and the long-run share of technologically advanced sectors in the economy. Then, we explore how different degrees of openness affect long-term incentives to invest in basic research. Our main insight is that higher openness tends to encourage more investment in basic research which, in turn, yields a larger share of leading sectors. If, however, there are prospects of importing large technology advancements, highly open countries will reduce basic research as such imports become particularly valuable.

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File URL: http://www.cer.ethz.ch/research/WP-10-139.pdf
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Bibliographic Info

Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 10/139.

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Length: 34 pages
Date of creation: Oct 2010
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Handle: RePEc:eth:wpswif:10-139

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Keywords: basic research; openness; economic growth;

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Cited by:
  1. Hans Gersbach & Maik T. Schneider, 2013. "On the Global Supply of Basic Research," CER-ETH Economics working paper series 13/175, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2013. "Theory and Empirics of Stage-Dependent Intellectual Property Rights," Economics Working Paper Series 1306, University of St. Gallen, School of Economics and Political Science.
  3. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2014. "Stage-dependent intellectual property rights," Journal of Development Economics, Elsevier, vol. 106(C), pages 239-249.

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