In this paper we put forward a model of basic research and long-run economic growth in which the incentives of social reward to scientific work may produce increasing returns and multiple equilibria. The state organizes production of new knowledge - a public good that improves firms technology - with taxes on the private sector. Scientists compete with one another to attain priority over a discovery and be awarded both a real prize and prestige in the scientific community. Also, scientists derive job motivation from dedication to science which provides social status. Analysis of the model shows, on the one hand, a low equilibrium where the economy is endowed with a small science sector, researchers have high relative income but low prestige, and competition for discoveries is weak. On the other hand, there is a high equilibrium where the economy has a large science sector, scientists obtain for new findings high prestige but lower relative salaries and, as the e¤ect of creative destruction is strong, there is fierce competition among researchers. Comparative statics shows that if the scientific infrastructure is poor, policies that increase the marginal benefits from a discovery have perverse e¤ects, while policies aimed at improving the selection mechanism of researchers work well. The same policies have opposite effects at the high steady state.
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Paper provided by D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Discussion Papers with number
10_2006.
Find related papers by JEL classification: O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives Z10 - Other Special Topics - - Cultural Economics - - - General H40 - Public Economics - - Publicly Provided Goods - - - General O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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