DP10357 On the Global Supply of Basic Research
|Author(s):||Hans Gersbach, Maik Schneider|
|Publication Date:||January 2015|
|Keyword(s):||basic research, coordination of governments, economic growth, public goods|
|Programme Areas:||Public Economics, Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10357|
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.