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Title: On the Global Supply of Basic Research

Author(s): Hans Gersbach and Maik Schneider

Publication Date: January 2015

Keyword(s): basic research, coordination of governments, economic growth and public goods

Programme Area(s): Industrial Organization and Public Economics

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.

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Bibliographic Reference

Gersbach, H and Schneider, M. 2015. 'On the Global Supply of Basic Research'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10357