Social rewards in science and economic growth

In this paper we put forward a model of basic research and long-run economic growth in which the incentives of social reward to scientific work may produce increasing returns and multiple equilibria. The state organizes production of new knowledge - a public good that improves firms' technology - with taxes on the private sector. Scientists compete with one another to attain priority over a discovery and be awarded both a real prize and prestige in the scientific community. Also, scientists\ derive job motivation from dedication to science which provides social status. Analysis of the model shows, on the one hand, a low equilibrium where the economy is endowed with a small science sector, researchers have high relative income but low prestige, and competition for discoveries is weak. On the other hand, there is a high equilibrium where the economy has a large science sector, scientists obtain for new findings high prestige but lower relative salaries and, as the effect of creative destruction is strong, there is fierce competition among researchers. Comparative statics shows that if the scientific infrastructure is poor, policies that increase the marginal benefits from a discovery have perverse effects, while policies aimed at improving the selection mechanism of researchers work well. \ The same policies have opposite effects at the high steady state.