Economic Rationales for Investments in Science

CER-ETH Working Paper 18/298

55 Pages Posted: 17 Nov 2018

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)

Ulrich Schetter

Harvard University - Center for International Development (CID)

Maik T. Schneider

University of Bath

Date Written: October 18, 2018

Abstract

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

Gersbach, Hans and Schetter, Ulrich and Schneider, Maik T., Economic Rationales for Investments in Science (October 18, 2018). CER-ETH Working Paper 18/298. Available at SSRN: https://ssrn.com/abstract=3269295 or http://dx.doi.org/10.2139/ssrn.3269295

Hans Gersbach (Contact Author)

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

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

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ulrich Schetter

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Maik T. Schneider

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

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