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

53 Pages Posted: 19 Dec 2016

See all articles by Ufuk Akcigit

Ufuk Akcigit

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); Center for Economic and Policy Research (CEPR)

Douglas Hanley

University of Pittsburgh

Nicolas Andre Benigno Serrano-Velarde

Bocconi University

Multiple version iconThere are 3 versions of this paper

Date Written: December 2016

Abstract

This paper introduces a general equilibrium model of endogenous technical change through basic and applied research. Basic research differs from applied research in the nature and the magnitude of the generated spillovers. We propose a novel way of empirically identifying these spillovers and embed them in a framework with private firms and a public research sector. After characterizing the equilibrium, we estimate our model using micro-level data on research expenditures by French firms. Our key finding is that standard innovation policies (e.g., uniform R&D tax credits) can accentuate the dynamic misallocation in the economy by oversubsidizing applied research. Policies geared towards public basic research and its transmission to the private sector are significantly welfare improving.

Keywords: applied research, basic research, Endogenous Growth, government spending, innovation, productivity, Research and Development, spillover.

JEL Classification: J82, L25, L50, O31, O38, O40

Suggested Citation

Akcigit, Ufuk and Hanley, Douglas and Serrano-Velarde, Nicolas Andre Benigno, Back to Basics: Basic Research Spillovers, Innovation Policy and Growth (December 2016). CEPR Discussion Paper No. DP11707. Available at SSRN: https://ssrn.com/abstract=2887326

Ufuk Akcigit (Contact Author)

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
United States

HOME PAGE: http://www.ufukakcigit.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Center for Economic and Policy Research (CEPR) ( email )

London
United Kingdom

Douglas Hanley

University of Pittsburgh ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

HOME PAGE: http://doughanley.com

Nicolas Andre Benigno Serrano-Velarde

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

HOME PAGE: http://https://sites.google.com/site/nicolasserranovelarde/

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