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

In: Innovation Policy and the Economy, Volume 9

  • Richard Freeman
  • John Van Reenen

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 National Institutes of Health (NIH) budget on the biomedical 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 adds to the human capital of researchers, which has greater value for young scientists because of their longer future career life span than for older scientists, there is a human capital–based reason for giving awards to younger researchers relative to equally competent older researchers.

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This chapter was published in:
  • Josh Lerner & Scott Stern, 2009. "Innovation Policy and the Economy, Volume 9," NBER Books, National Bureau of Economic Research, Inc, number lern08-1, June.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8182.
    Handle: RePEc:nbr:nberch:8182
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. Lynne G. Zucker & Michael R. Darby & Marilynn B. Brewer, 1994. "Intellectual Capital and the Birth of U.S. Biotechnology Enterprises," NBER Working Papers 4653, National Bureau of Economic Research, Inc.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
    3. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
    4. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
    5. Bronwyn H. Hall & John van Reenen, 1999. "How Effective are Fiscal Incentives for R&D? A New Review of the Evidence," NBER Working Papers 7098, National Bureau of Economic Research, Inc.
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