Abstract

http://ssrn.com/abstract=226269
 
 

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Does Government R&D Policy Mainly Benefit Scientists and Engineers?


Austan Goolsbee


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

April 1998

NBER Working Paper No. w6532

Abstract:     
Conventional wisdom holds that the social rate of return to R&D significantly exceeds the private rate of return and, therefore, R&D should be subsidized. In the U.S., the government has directly funded a large fraction of total R&D spending. This paper shows that there is a serious problem with such government efforts to increase inventive activity. The majority of R&D spending is actually just salary payments for R&D workers. Their labor supply, however, is quite inelastic so when the government funds R&D, a significant fraction of the increased spending goes directly into higher wages. Using CPS data on wages of scientific personnel, this paper shows that government R&D spending raises wages significantly, particularly for scientists related to defense such as physicists and aeronautical engineers. Because of the higher wages, conventional estimates of the effectiveness of R&D policy may be 30 to 50% too high. The results also imply that by altering the wages of scientists and engineers even for firms not receiving federal support, government funding directly crowds out private inventive activity.

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Date posted: August 14, 2000  

Suggested Citation

Goolsbee, Austan, Does Government R&D Policy Mainly Benefit Scientists and Engineers? (April 1998). NBER Working Paper No. w6532. Available at SSRN: http://ssrn.com/abstract=226269

Contact Information

Austan Goolsbee (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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