On the Global Supply of Basic Research
CER-ETH - Center of Economic Research at ETH Zurich Working Paper No. 13/175
40 Pages Posted: 12 Mar 2013
There are 2 versions of this paper
On the Global Supply of Basic Research
On the Global Supply of Basic Research
Date Written: Feburary 12, 2013
Abstract
In this paper we study the incentives for basic-research investments by governments in a globalized world. For this purpose, we develop a two-country Schumpeterian growth model in which each country chooses its basic-research investments. We find that a country's basic-research investments increase with the country's level of human capital and decline with its own market size. This may explain the large basic-research investments by small open economies. Compared with the optimal investments achievable when countries coordinate their basic-research policies, a single country may over-invest in basic research. However, in the decentralized case the total amount of basic-research investments is always below the socially optimal investment level, which justifies policy coordination in this area.
Keywords: basic research, public goods, economic growth, coordination of governments
JEL Classification: O31, O38
Suggested Citation: Suggested Citation
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