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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. 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.
  3. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," NBER Working Papers 12522, National Bureau of Economic Research, Inc.
  4. 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.
  5. María Morales, 2004. "Research policy and endogenous growth," Spanish Economic Review, Springer;Spanish Economic Association, vol. 6(3), pages 179-209, October.
  6. 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.
  7. Jaffe, Adam B, 1989. "Real Effects of Academic Research," American Economic Review, American Economic Association, vol. 79(5), pages 957-970, December.
  8. 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.
  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. 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.
  4. Alexander Cuntz, 2014. "ERAWATCH Country Reports 2012: Austria," JRC Working Papers JRC83823, Joint Research Centre (Seville site).
  5. 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.
  6. Klaus Schuch, 2012. "ERAWATCH country reports 2011: Austria," JRC Working Papers JRC77707, Joint Research Centre (Seville site), revised Dec 2012.

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