Economic Rationales for Investments in Science
CER-ETH Working Paper 18/298
55 Pages Posted: 17 Nov 2018
Date Written: October 18, 2018
What is the economic rationale for investing in science? Based on an open economy model of creative destruction, we characterize four key factors of optimal investment in basic research: the stage of economic development, the strength of the manufacturing base, the degree of openness, and the share of foreign-owned firms. For each of these factors, we analyse its bearings on optimal basic research investment. We then show that the predicted effects are consistent with patterns observed in the data and discuss how the factor-based approach might inform basic research policies.
Keywords: Basic Research, Economic Growth, Growth Policy
JEL Classification: H41, O38
Suggested Citation: Suggested Citation