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On the Global Supply of Basic Research

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Abstract

In this paper we study the incentives for basic-research investments by governments in a globalized world. For this purpose, we develop a two-country Schumpeterian growth model in which each country chooses its basic-research investments. We find that a country's basic-research investments increase with the country's level of human capital and decline with its own market size. This may explain the large basic-research investments by small open economies. Compared with the optimal investments achievable when countries coordinate their basic-research policies, a single country may over-invest in basic research. However, in the decentralized case the total amount of basic-research investments is always below the socially optimal investment level, which justifies policy coordination in this area.

Suggested Citation

  • Hans Gersbach & Maik T. Schneider, 2013. "On the Global Supply of Basic Research," CER-ETH Economics working paper series 13/175, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  • Handle: RePEc:eth:wpswif:13-175
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Cozzi, Guido & Galli, Silvia, 2017. "Should the government protect its basic research?," Economics Letters, Elsevier, vol. 157(C), pages 122-124.
    3. Christos Karydas, 2017. "The inter-temporal dimension to knowledge spillovers: any non-environmental reason to support clean innovation?," CER-ETH Economics working paper series 17/267, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    4. 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.
    5. 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.
    6. 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).

    More about this item

    Keywords

    basic research; public goods; economic growth; coordination of governments.;

    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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