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

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  • Akcigit, Ufuk
  • Hanley, Douglas
  • Serrano-Velarde, Nicolas

Abstract

This paper introduces a general equilibrium model of endogenous technical change through basic and applied research. Basic research differs from applied research in the nature and the magnitude of the generated spillovers. We propose a novel way of empirically identifying these spillovers and embed them in a framework with private firms and a public research sector. After characterizing the equilibrium, we estimate our model using micro-level data on research expenditures by French firms. Our key finding is that standard innovation policies (e.g., uniform R&D tax credits) can accentuate the dynamic misallocation in the economy by oversubsidizing applied research. Policies geared towards public basic research and its transmission to the private sector are significantly welfare improving.

Suggested Citation

  • Akcigit, Ufuk & Hanley, Douglas & Serrano-Velarde, Nicolas, 2016. "Back to Basics: Basic Research Spillovers, Innovation Policy and Growth," CEPR Discussion Papers 11707, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11707
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    More about this item

    Keywords

    Productivity; Innovation; Basic research; Applied research; Research and development; Government spending; Endogenous growth; Spillover;
    All these keywords.

    JEL classification:

    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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