On the Design of Basic-Research Policy
CER-ETH Center of Economic Research at ETH Zurich, Working Paper No. 08/79
44 Pages Posted: 5 Feb 2008
Date Written: January 1, 2008
We augment a Schumpeterian growth model with a public basic-research sector to examine how much a country should invest in basic research. We find that the closer the country is to the world's technological frontier the more the government should invest in basic research. Basic-research expenditures are increasing with a country's degree of openness as long as innovation sizes are small. We provide possible explanations for the empirical evidence available on basic-research expenditures across countries.
Keywords: basic research, openness, distance to frontier, economic growth
JEL Classification: O31, O38
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