Basically Trapped -- A General Equilibrium Approach to the Undersupply of Basic Research in Free Markets

Lucas Darius Konrad

Papers from arXiv.org

Abstract: In this paper I propose a micro-based innovation driven general equilibrium growth-model allowing for endogenous entry and exit as well as three different types of research. I make the novel distinction between three types of firms, namely basic and applied research where applied research is again differentiated into high and low type research to account for a heterogeneous firm environment. I further propose a new and flexible way to model basic research spillovers in this model class. While previous literature addresses the effect of R&D policies in general, my findings suggest, there is no optimal market solution in which basic research takes a noteworthy share. In order to counteract this undersupply and to take advantage of basic research spillovers, a sizable basic research subsidy is required to sufficiently crowd-in basic research which then allows for a substantial increase in welfare. My findings also suggest the necessity for purely state-financed basic research to approach the social planner solution in a feasible manner.

Date: 2025-11
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2511.17251 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2511.17251

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().