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Basic Research, Openness, and Convergence

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Abstract

We study a model where economic growth is fueled by public basic-research investment and the importation of leading technology from foreign countries. In each period, the government chooses the amount of basic research, balancing the cost and benefits of stimulating growth through both channels. We establish the existence of steady states and the long-run share of technologically advanced sectors in the economy. Then, we explore how different degrees of openness affect long-term incentives to invest in basic research. Our main insight is that higher openness tends to encourage more investment in basic research which, in turn, yields a larger share of leading sectors. If, however, there are prospects of importing large technology advancements, highly open countries will reduce basic research as such imports become particularly valuable.

Suggested Citation

  • Hans Gersbach & Maik T. Schneider & Olivier Schneller, 2010. "Basic Research, Openness, and Convergence," CER-ETH Economics working paper series 10/139, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  • Handle: RePEc:eth:wpswif:10-139
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    Cited by:

    1. Prettner, Klaus & Werner, Katharina, 2016. "Why it pays off to pay us well: The impact of basic research on economic growth and welfare," Research Policy, Elsevier, vol. 45(5), pages 1075-1090.
    2. Guido Cozzi & Silvia Galli, 2014. "Sequential R&D and blocking patents in the dynamics of growth," Journal of Economic Growth, Springer, vol. 19(2), pages 183-219, June.
    3. Werner, Katharina & Prettner, Klaus, 2014. "Human capital, basic research, and applied research: three dimensions of human knowledge and their differential growth effects," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100448, Verein für Socialpolitik / German Economic Association.
    4. Schetter, Ulrich & Gersbach, Hans & Schneider, Maik, 2013. "Taxation, Innovation and Entrepreneurship," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79776, Verein für Socialpolitik / German Economic Association.
    5. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2014. "Stage-dependent intellectual property rights," Journal of Development Economics, Elsevier, vol. 106(C), pages 239-249.
    6. 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.
    7. Gersbach, Hans & Schneider, Maik T., 2015. "On the global supply of basic research," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 123-137.
    8. repec:eee:ecolet:v:157:y:2017:i:c:p:122-124 is not listed on IDEAS
    9. Kunihiko Konishi, 2015. "Basic and Applied Research: A Welfare Analysis," Discussion Papers in Economics and Business 15-08, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    10. Cozzi, Guido & Galli, Silvia, 2017. "Should the government protect its basic research?," Economics Letters, Elsevier, vol. 157(C), pages 122-124.
    11. Gersbach, Hans & Schetter, Ulrich & Schneider, Maik, 2015. "How Much Science? The 5 Ws (and 1 H) of Investing in Basic Research," CEPR Discussion Papers 10482, C.E.P.R. Discussion Papers.
    12. Manuel A. Gómez & Tiago Neves Sequeira, 2016. "R&D Subsidies and Foreign Direct Investment," Open Economies Review, Springer, vol. 27(4), pages 769-793, September.
    13. Hallonsten, Jan Simon & Ziesemer, Thomas, 2016. "A semi-endogenous growth model for developing countries with public factors, imported capital goods, and limited export demand," MERIT Working Papers 004, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    basic research; openness; economic growth;

    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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