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Back to Basics: Basic Research Spillovers, Innovation Policy and Growth

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  • Nicolas Serrano-Velarde

    (Oxford University)

  • Douglas Hanley

    (University of Pennsylvania)

  • Ufuk Akcigit

    (University of Pennsylvania)

Abstract

This paper introduces endogenous technical change through basic and applied research in a growth model. Basic research differs from applied research in two significant ways. First, significant advances in technological knowledge come through basic research rather than applied research. Second, these significant advances could potentially be applicable to multiple industries. Since these applications are not immediate, the innovating firm cannot exploit all the benefits of the basic innovations for production. We analyze the impact of this appropriability problem on firmsâ basic research incentives in an endogenous growth framework with private firms and an academic sector. After characterizing the equilibrium, we estimate our model using micro level data on research expenditures and behavior by French firms. We then decompose the aggregate growth by the source and type of innovation. Moreover, we quantitatively document the size of the underinvestment in basic research and consider various research policies to alleviate this inefficiency. Our analysis highlights the need for devoting a larger fraction of GDP for basic academic research, as well as higher subsidy rates for private research.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 665.

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Date of creation: 2012
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Handle: RePEc:red:sed012:665

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References

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  1. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  2. Giammario Impullitti, 2008. "International Competition and U.S. R&D Subsidies: A Quantitative Welfare Analysis," Economics Working Papers ECO2008/11, European University Institute.
  3. Link, Albert N, 1981. "Basic Research and Productivity Increase in Manufacturing: Additional Evidence," American Economic Review, American Economic Association, vol. 71(5), pages 1111-12, December.
  4. Partha, Dasgupta & David, Paul A., 1994. "Toward a new economics of science," Research Policy, Elsevier, vol. 23(5), pages 487-521, September.
  5. Sharon Belenzon & Tomer Berkovitz & Patrick Bolton, 2009. "Intracompany Governance and Innovation," NBER Working Papers 15304, National Bureau of Economic Research, Inc.
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Cited by:
  1. Cozzi, Guido & Galli, Silvia, 2013. "Sequential R&D and Blocking Patents in the Dynamics of Growth," Economics Working Paper Series 1305, University of St. Gallen, School of Economics and Political Science.
  2. Daron Acemoglu & Ufuk Akcigit & Nicholas Bloom & William R. Kerr, 2013. "Innovation, Reallocation and Growth," PIER Working Paper Archive 13-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Philippe Aghion & Ufuk Akcigit & Peter Howitt, 2013. "What Do We Learn From Schumpeterian Growth Theory?," NBER Working Papers 18824, National Bureau of Economic Research, Inc.
  4. Suen, Richard M.H., 2013. "Research Policy and U.S. Economic Growth," MPRA Paper 49103, University Library of Munich, Germany.
  5. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563 Elsevier.
  6. Dutz, Mark A., 2013. "Resource reallocation and innovation : converting enterprise risks into opportunities," Policy Research Working Paper Series 6534, The World Bank.
  7. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2013. "What Do We Learn From Schumpeterian Growth Theory?," Working Paper Series in Economics and Institutions of Innovation 298, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  8. Prettner, Klaus & Werner, Katharina, 2014. "Human capital, basic research, and applied research: Three dimensions of human knowledge and their differential growth effects," Center for European, Governance and Economic Development Research Discussion Papers 186, University of Goettingen, Department of Economics.
  9. Liu, Runjuan & Rosell, Carlos, 2013. "Import competition, multi-product firms, and basic innovation," Journal of International Economics, Elsevier, vol. 91(2), pages 220-234.
  10. Philippe Aghion & Ufuk Akcigit & Peter Brown, 2013. "What Do We Learn From Schumpeterian Growth Theory?," PIER Working Paper Archive 13-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  11. Guido Cozzi & Silvia Galli, 2014. "Sequential R&D and blocking patents in the dynamics of growth," Journal of Economic Growth, Springer, vol. 19(2), pages 183-219, June.

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