From Local to Global: A Unified Theory of Public Basic Research

Hans Gersbach, Ulrich Schetter and Samuel Schmassmann ()

No 1816, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: We analyze public investment in basic research in a multi-country, multi-industry environment with international trade. In our economy, basic research generates ideas which private firms take up in applied research to develop new varieties. Such development requires industryspecific know-how. A country's current specialization in international trade thus determines which ideas can be commercialized domestically. We demonstrate that the equilibrium is consistent with key patterns observed from the data. We then compare basic research investments of national governments with optimal investments of a global social planner. We show that national investments are inefficient along three dimensions: (1) There is typically too little total investment in basic research. (2) Basic research is too heavily concentrated in industrialized countries. (3) And basic research is potentially insufficiently directed to support innovation in complex, high-tech industries.

Keywords: applied research; basic research; economic growth; international trade; knowledge spillover; optimal policy (search for similar items in EconPapers)
JEL-codes: F10 F43 H40 O31 O38 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2018-12
New Economics Papers: this item is included in nep-ino and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: From Local to Global: A Unified Theory of Public Basic Research (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2018:16

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