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On the Design of Basic-Research Policy

Abstract

We augment a Schumpeterian growth model with a public basic-research sector to examine how much a country should invest in basic research. We find that the closer the country is to the world’s technological frontier the more the government should invest in basic research. Basic-research expenditures are increasing with a country’s degree of openness as long as innovation sizes are small. We provide possible explanations for the empirical evidence available on basic-research expenditures across countries.

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File URL: https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/wp_08_79.pdf
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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 08/79.

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Length: 44 pages
Date of creation: Jan 2008
Handle: RePEc:eth:wpswif:08-79
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Keywords: basic research; openness; distance to frontier; economic growth;

Find related papers by JEL classification:

  • 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

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  1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
  2. Areendam Chanda & Lee A. Craig & Julianne Treme, "undated". "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," Departmental Working Papers 2007-01, Department of Economics, Louisiana State University.
  3. Wolfgang Keller & Stephen R. Yeaple, 2009. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 821-831, November.
  4. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
  5. Jaffe, Adam B, 1989. "Real Effects of Academic Research," American Economic Review, American Economic Association, vol. 79(5), pages 957-970, December.
  6. María Morales, 2004. "Research policy and endogenous growth," Spanish Economic Review, Springer;Spanish Economic Association, vol. 6(3), pages 179-209, October.
  7. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
  8. Maria Rosaria Carillo & Erasmo Papagni, 2006. "Social Rewards in Science and Economic Growth," Discussion Papers 10_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  9. Karl Shell, 2010. "A Model of Inventive Activity and Capital Accumulation," Levine's Working Paper Archive 1409, David K. Levine.
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Cited by:

  1. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2011. "Structural estimation and solution of international trade models with heterogeneous firms," Journal of International Economics, Elsevier, vol. 83(2), pages 95-108, March.
  2. Nicolas Serrano-Velarde & Douglas Hanley & Ufuk Akcigit, 2012. "Back to Basics: Basic Research Spillovers, Innovation Policy and Growth," 2012 Meeting Papers 665, Society for Economic Dynamics.
  3. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2010. "Trade and welfare: Does industrial organization matter?," Economics Letters, Elsevier, vol. 109(2), pages 85-87, November.
  4. Klaus Schuch, 2012. "ERAWATCH country reports 2011: Austria," JRC Working Papers JRC77707, Joint Research Centre (Seville site), revised Dec 2012.
  5. Nicolas Serrano-Velarde & Douglas Hanley & Ufuk Akcigit, 2011. "Back to Basics: Private and Public Investment in Basic R&D and Macroeconomic Growth," 2011 Meeting Papers 1196, Society for Economic Dynamics.
  6. Alexander Cuntz, 2014. "ERAWATCH Country Reports 2012: Austria," JRC Working Papers JRC83823, Joint Research Centre (Seville site).

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