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Does Federal Funding "Crowd In" Private Funding Of Science?

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  • ARTHUR M. DIAMOND

Abstract

"Proposed cutbacks in government science funding have caused many to expect that the rate of scientific progress will significantly decline. Before the magnitude of the decline can be estimated, a preliminary question must be answered: what is the extent to which private funding of science may be expected to fill the gap left by the declining government funding? Using data on government and private funding of science, preliminary estimation indicates that past government funding of science has not "crowded out" private funding of science. If this finding is supported by further research, it would indicate that private funding could not be expected to replace lost federal funding of science. (JEL" H4, HI, 03, D6, L3) Copyright 1999 Western Economic Association International.

Suggested Citation

  • Arthur M. Diamond, 1999. "Does Federal Funding "Crowd In" Private Funding Of Science?," Contemporary Economic Policy, Western Economic Association International, vol. 17(4), pages 423-431, October.
  • Handle: RePEc:bla:coecpo:v:17:y:1999:i:4:p:423-431
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    2. Lööf, Hans & Heshmati, Almas, 2004. "The Impact of Public Funding on Private R&D investment: New Evidence from a Firm Level Innovation Study," Working Paper Series in Economics and Institutions of Innovation 6, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies, revised 01 Mar 2005.
    3. David, Paul A. & Hall, Bronwyn H., 2000. "Heart of darkness: modeling public-private funding interactions inside the R&D black box," Research Policy, Elsevier, pages 1165-1183.
    4. Abraham Garcia, 2011. "The European Research Framework Programme and innovation performance of companies. An empirical impact assessment using a CDM model," JRC Working Papers on Corporate R&D and Innovation 2011-07, Joint Research Centre (Seville site).
    5. Piekkola, Hannu, 2005. "Public Funding of R&D and Growth: Firm-level Evidence from Finland," Discussion Papers 996, The Research Institute of the Finnish Economy.
    6. Ricardo N.Bebczuk, 2002. "R&D expenditures and the role of government around the world," Estudios de Economia, University of Chile, Department of Economics, vol. 29(1 Year 20), pages 109-121, June.
    7. Gray, Richard S. & Malla, Stavroula & Tran, Kien C., 2003. "An Empirical Analysis Of Public And Private Spillovers Within The Canola Biotech Industry," 2003 Annual meeting, July 27-30, Montreal, Canada 22137, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Francisco de Castro Fernández & José Manuel González Mínguez, 2008. "The composition of public finances and long-term growth: a macroeconomic approach," Occasional Papers 0809, Banco de España;Occasional Papers Homepage.
    9. José Ángel Zúñiga-Vicente & César Alonso-Borrego & Francisco J. Forcadell & José I. Galán, 2014. "Assessing The Effect Of Public Subsidies On Firm R&D Investment: A Survey," Journal of Economic Surveys, Wiley Blackwell, pages 36-67.
    10. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, pages 497-529.
    11. Bronwyn H. Hall & Albert N. Link & John T. Scott, 2003. "Universities as Research Partners," The Review of Economics and Statistics, MIT Press, pages 485-491.
    12. Richard Breen & Cecilia García-Peñalosa, 2005. "Income Inequality and Macroeconomic Volatility: An Empirical Investigation," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 380-398, August.
    13. Heshmati, Almas & Loof, Hans, 2005. "The Impact of Public Funds on Private R&D Investment: New Evidence from a Firm Level Innovation Study," Discussion Papers 11862, MTT Agrifood Research Finland.
    14. David, Paul A. & Hall, Bronwyn H., 2000. "Heart of darkness: modeling public-private funding interactions inside the R&D black box," Research Policy, Elsevier, pages 1165-1183.
    15. Gray, Richard S. & Malla, Stavroula & Tran, Kien C., 2005. "Pecuniary, Non-Pecuniary, and Downstream Research Spillovers: The Case of Canola," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24776, European Association of Agricultural Economists.
    16. Malla, Stavroula & Gray, Richard S., 2001. "An Analytical And Empirical Analysis Of The Private Biotech R&D Incentives," 2001 Annual meeting, August 5-8, Chicago, IL 20544, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Janina Reinkowski & Timo Mitze & Björn Alecke & Gerhard Untiedt, 2011. "R&D Subsidies and Private Sector Innovativeness: New Empirical Evidence for East German Firms," ERSA conference papers ersa10p1071, European Regional Science Association.
    18. Maroto Sánchez, Andrés & Rubalcaba Bermejo, Luis & Gallego Martinez, Jorge, 2016. "On the role of publicly funded R&D for public sector performance," Working Papers in Economic Theory 2016/02, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    19. Marino, Marianna & Parrotta, Pierpaolo & Sala, Davide, 2010. "New Perspectives on the Evaluation of Public R&D Funding," Working Papers 11-2, University of Aarhus, Aarhus School of Business, Department of Economics.
    20. Muscio, Alessandro & Quaglione, Davide & Vallanti, Giovanna, 2013. "Does government funding complement or substitute private research funding to universities?," Research Policy, Elsevier, pages 63-75.
    21. Margaret E. Blume-Kohout & Krishna B. Kumar & Neeraj Sood, 2009. "Federal Life Sciences Funding and University R&D," NBER Working Papers 15146, National Bureau of Economic Research, Inc.
    22. Lauren Lanahan, 2016. "Multilevel public funding for small business innovation: a review of US state SBIR match programs," The Journal of Technology Transfer, Springer, vol. 41(2), pages 220-249, April.
    23. Giovanni Cerulli & Bianca Poti', 2008. "Evaluating the Effect of Public Subsidies on firm R&D activity: an Application to Italy Using the Community Innovation Survey," CERIS Working Paper 200809, Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY.
    24. Paul A. David & Bronwyn H. Hall & Andrew A. Toole, 1999. "Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence," Working Papers 99023, Stanford University, Department of Economics.
    25. Andrea Bellucci & Luca Pennacchio & Alberto Zazzaro, 2016. "Public subsidies for SME research and development: Empirical evaluation of collaborative versus individual place-based programs," Mo.Fi.R. Working Papers 133, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • D6 - Microeconomics - - Welfare Economics
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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