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What If Congress Doubled R&D Spending on the Physical Sciences?

In: Innovation Policy and the Economy, Volume 9

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  • Richard Freeman
  • John Van Reenen

Abstract

Many business, academic, and scientific groups have recommended that the Congress substantially increase R&D spending in the near future. President Bush’s American Competitiveness Initiative calls for a doubling of spending over the next decade in selected agencies that deal with the physical sciences, including the National Science Foundation. We consider the rationale for government R&D spending in the context of globalization and as an investment in human capital and knowledge creation with gestation times far longer than Federal funding cycles. To assess the impact of a large increase in R&D spending on the science job market, we examine the impact of the 1998- 2003 doubling of the NIH budget on the bio-medical sciences. We find that the rapid increase in NIH spending and ensuing deceleration created substantial adjustment problems in the market for research and failed to address long-standing problems with scientific careers that are likely to deter many young people from choosing a scientific career. We argue that because research simultaneously produces knowledge and add to the human capital of researchers, which has greater value for young scientists because of their longer future career life span than to older scientists, there is reason for funding agencies to tilt their awards to younger researchers.
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  • Richard Freeman & John Van Reenen, 2009. "What If Congress Doubled R&D Spending on the Physical Sciences?," NBER Chapters, in: Innovation Policy and the Economy, Volume 9, pages 1-38, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:8182
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    3. Boehm, Michael J. & Watzinger, Martin, 2010. "The Allocation of Talent: Evidence from the Market of Economists," MPRA Paper 27463, University Library of Munich, Germany.
    4. Ana Rincon-Aznar, 2009. "Rates of return and alternative measures of capital input: 14 countries and 10 branches, 1971-2005," National Institute of Economic and Social Research (NIESR) Discussion Papers 347, National Institute of Economic and Social Research.
    5. Rockett, Katharine, 2012. "Perspectives on the knowledge-based society: An introduction to the special issue," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-22.
    6. Alex Bell & Raj Chetty & Xavier Jaravel & Neviana Petkova & John Van Reenen, 2019. "Joseph Schumpeter Lecture, EEA Annual Congress 2017: Do Tax Cuts Produce more Einsteins? The Impacts of Financial Incentives VerSus Exposure to Innovation on the Supply of Inventors," Journal of the European Economic Association, European Economic Association, vol. 17(3), pages 651-677.
    7. Fons-Rosen, Christian & Gaule, Patrick & Hrendash, Taras, 2023. "Why Has Science Become an Old Man's Game?," IZA Discussion Papers 16365, Institute of Labor Economics (IZA).
    8. David Popp, 2015. "Using Scientific Publications to Evaluate Government R&D Spending: The Case of Energy," CESifo Working Paper Series 5442, CESifo.
    9. Bell, Alex & Chetty, Raj & Jaravel, Xavier & Petkova, Neviana & Van Reenen, John, 2019. "Do tax cuts produce more Einsteins? The impacts of financial incentives vs. exposure to innovation on the supply of inventors," LSE Research Online Documents on Economics 121796, London School of Economics and Political Science, LSE Library.
    10. Filippetti, Andrea & Vezzani, Antonio, 2022. "The political economy of public research, or why some governments commit to research more than others," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    11. Archibugi, Daniele & Filippetti, Andrea, 2018. "The retreat of public research and its adverse consequences on innovation," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 97-111.
    12. Sila, Urban, 2009. "Can family-support policies help explain differences in working hours across countries?," LSE Research Online Documents on Economics 28684, London School of Economics and Political Science, LSE Library.
    13. Schuelke-Leech, Beth-Anne, 2014. "Volatility in federal funding of energy R&D," Energy Policy, Elsevier, vol. 67(C), pages 943-950.
    14. Cockburn Iain M. & Stern Scott, 2010. "Finding the Endless Frontier: Lessons from the Life Sciences Innovation System for Technology Policy," Capitalism and Society, De Gruyter, vol. 5(1), pages 1-50, July.
    15. Kristina M. Lybecker, 2014. "Innovation and Technology Dissemination in Clean Technology Markets and The Developing World: The Role of Trade, Intellectual Property Rights, and Uncertainty," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 10(2), pages 7-38.
    16. Dimitrios Bisias & Andrew W Lo & James F Watkins, 2012. "Estimating the NIH Efficient Frontier," PLOS ONE, Public Library of Science, vol. 7(5), pages 1-10, May.
    17. David Popp, 2015. "Using Scientific Publications to Evaluate Government R&D Spending: The Case of Energy," NBER Working Papers 21415, National Bureau of Economic Research, Inc.
    18. Oleksandr Oksanych, 2020. "Innovation As An Opportunity For Economic Development Of Central Eastern Europe Countries (Poland Case Study)," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 14(1), pages 268-281.
    19. Jeffrey L. Furman, 2013. "The America COMPETES Acts: The Future of US Physical Science and Engineering Research?," Innovation Policy and the Economy, University of Chicago Press, vol. 13(1), pages 101-149.
    20. Hu, Albert G.Z., 2020. "Public funding and the ascent of Chinese science: Evidence from the National Natural Science Foundation of China," Research Policy, Elsevier, vol. 49(5).
    21. Michael Boehm & Martin Watzinger, 2012. "The Allocation of Talent over the Business Cycle and its Effect on Sectoral Productivity," CEP Discussion Papers dp1143, Centre for Economic Performance, LSE.
    22. Eric T. Stuen, 2013. "Aggregate evidence of localized academic knowledge transfer in the U.S," Economics Bulletin, AccessEcon, vol. 33(2), pages 1468-1478.
    23. Boehm, Michael J. & Watzinger, Martin, 2010. "The Selection of Skills into Sectors: Evidence from the Market for Economists," MPRA Paper 23315, University Library of Munich, Germany.
    24. Jeffrey L. Furman, 2012. "The America COMPETES Acts: The Future of US Physical Science and Engineering Research?," NBER Chapters, in: Innovation Policy and the Economy, Volume 13, pages 101-149, National Bureau of Economic Research, Inc.
    25. Kim, Jin-Yeong, 2016. "The Impact of Government Support of Graduate Schools on the Research Productivity of Professors and Students," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 38(2), pages 63-85.

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    More about this item

    JEL classification:

    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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