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Back to Basics: Basic Research Spillovers, Innovation Policy and Growth

  • Nicolas Serrano-Velarde

    (Oxford University)

  • Douglas Hanley

    (University of Pennsylvania)

  • Ufuk Akcigit

    (University of Pennsylvania)

This paper introduces endogenous technical change through basic and applied research in a growth model. Basic research differs from applied research in two significant ways. First, significant advances in technological knowledge come through basic research rather than applied research. Second, these significant advances could potentially be applicable to multiple industries. Since these applications are not immediate, the innovating firm cannot exploit all the benefits of the basic innovations for production. We analyze the impact of this appropriability problem on firmsâ basic research incentives in an endogenous growth framework with private firms and an academic sector. After characterizing the equilibrium, we estimate our model using micro level data on research expenditures and behavior by French firms. We then decompose the aggregate growth by the source and type of innovation. Moreover, we quantitatively document the size of the underinvestment in basic research and consider various research policies to alleviate this inefficiency. Our analysis highlights the need for devoting a larger fraction of GDP for basic academic research, as well as higher subsidy rates for private research.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 665.

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Date of creation: 2012
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Handle: RePEc:red:sed012:665
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. Tor Jakob Klette & Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
  2. Luis Garicano & Claire LeLarge & John Van Reenen, 2013. "Firm Size Distortions and the Productivity Distribution: Evidence from France," NBER Working Papers 18841, National Bureau of Economic Research, Inc.
  3. Jacques Mairesse & Pierre Mohnen, 2010. "Using Innovation Surveys for Econometric Analysis," CIRANO Working Papers 2010s-15, CIRANO.
  4. Giammario Impullitti, 2010. "International Competition And U.S. R&D Subsidies: A Quantitative Welfare Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1127-1158, November.
  5. Daniel J. Wilson, 2009. "Beggar Thy Neighbor? The In-State, Out-of-State, and Aggregate Effects of R&D Tax Credits," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 431-436, May.
  6. Daron Acemoglu & Ufuk Akcigit & Douglas Hanley & William R. Kerr, 2014. "Transition to Clean Technology," Harvard Business School Working Papers 15-045, Harvard Business School.
  7. Ariél Pakes & Zvi Griliches, 1984. "Estimating Distributed Lags in Short Panels with an Application to the Specification of Depreciation Patterns and Capital Stock Constructs," Review of Economic Studies, Oxford University Press, vol. 51(2), pages 243-262.
  8. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 577-598.
  9. Estelle Dhont-Peltrault & Etienne Pfister, 2011. "R&D cooperation versus R&D subcontracting: empirical evidence from French survey data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(4), pages 309-341.
  10. María Morales, 2004. "Research policy and endogenous growth," Spanish Economic Review, Springer;Spanish Economic Association, vol. 6(3), pages 179-209, October.
  11. Partha, Dasgupta & David, Paul A., 1994. "Toward a new economics of science," Research Policy, Elsevier, vol. 23(5), pages 487-521, September.
  12. Link, Albert N, 1981. "Basic Research and Productivity Increase in Manufacturing: Additional Evidence," American Economic Review, American Economic Association, vol. 71(5), pages 1111-12, December.
  13. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  14. Mansfield, Edwin, 1980. "Basic Research and Productivity Increase in Manufacturing," American Economic Review, American Economic Association, vol. 70(5), pages 863-73, December.
  15. Rebecca Henderson & Adam B. Jaffe & Manuel Trajtenberg, 1998. "Universities As A Source Of Commercial Technology: A Detailed Analysis Of University Patenting, 1965-1988," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 119-127, February.
  16. E. Bacchiocchi & F. Montobbio, 2009. "Knowledge diffusion from university and public research. A comparison between US, Japan and Europe using patent citations," The Journal of Technology Transfer, Springer, vol. 34(2), pages 169-181, April.
  17. Sharon Belenzon & Tomer Berkovitz & Patrick Bolton, 2009. "Intracompany Governance and Innovation," NBER Working Papers 15304, National Bureau of Economic Research, Inc.
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