On the Global Supply of Basic Research
48 Pages Posted: 23 Jan 2015
There are 2 versions of this paper
On the Global Supply of Basic Research
Date Written: January 2015
Abstract
In a two-country Schumpeterian growth model, we study the incentives for basic research investments by governments in a globalized world. 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 that some smaller countries invest a lot in basic research. Compared with the optimal investments achievable when countries coordinate their basic research policies, a single country may over-invest in basic research. However, the total amount of decentralized basic research investments is always below the socially optimal investment level, which justifies policy coordination in this area.
Keywords: basic research, coordination of governments, economic growth, public goods
JEL Classification: O31, O38
Suggested Citation: Suggested Citation
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