Basic Research, Openness, and Convergence

CER-ETH Working Paper No. 10/139

34 Pages Posted: 9 Oct 2010

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Maik T. Schneider

University of Bath

Olivier Schneller

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: October 1, 2010

Abstract

We study a model where economic growth is fueled by public basic-research investment and the importation of leading technology from foreign countries. In each period, the government chooses the amount of basic research, balancing the cost and benefits of stimulating growth through both channels. We establish the existence of steady states and the long-run share of technologically advanced sectors in the economy. Then, we explore how different degrees of openness affect long-term incentives to invest in basic research. Our main insight is that higher openness tends to encourage more investment in basic research which, in turn, yields a larger share of leading sectors. If, however, there are prospects of importing large technology advancements, highly open countries will reduce basic research as such imports become particularly valuable.

Keywords: Basic Research, Openness, Economic Growth

JEL Classification: O31, O38

Suggested Citation

Gersbach, Hans and Schneider, Maik T. and Schneller, Olivier, Basic Research, Openness, and Convergence (October 1, 2010). CER-ETH Working Paper No. 10/139. Available at SSRN: https://ssrn.com/abstract=1689412 or http://dx.doi.org/10.2139/ssrn.1689412

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
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+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Maik T. Schneider

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Olivier Schneller

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 87 92 (Phone)
+41 44 632 18 67 (Fax)

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