Understanding the macroeconomic effects of public research: An application of a regression-microfounded CGE-model to the case of the Fraunhofer-Gesellschaft in Germany

Grant Allan, Gioele Figus and Torben Schubert

No 72, Discussion Papers "Innovation Systems and Policy Analysis" from Fraunhofer Institute for Systems and Innovation Research (ISI)

Abstract: Estimating the economic returns to public science investments has been a key topic in economics. However, while in particular microeconomic approaches have been proposed, only a few studies have tried estimating the macroeconomic effects of public science investments. In this paper, we propose a micro-rooted macro-modelling framework, which combines the strength of an econo-metric causal identification of key effects with the power of a Computable General Equilibrium (CGE) framework, and provides additional economic structure of the estimates allowing us a fine-grained sectoral differentiation of all effects. Applying our approach to the German Fraunhofer-Gesellschaft, the world's largest publicly funded organization for applied research, we show that macroeconomic returns are - irrespective of econometric specification - a high multitude of the original investment costs. In specific, the activities by the Fraunhofer-Gesellschaft increase German GDP by 1.6% and employment by 437,000 jobs. Our CGE analysis further shows that the effects concentrate in chem-icals, pharmaceuticals, motor vehicles and machinery sectors. The substantial size of our estimated effects corroborate recent macroeconomic evidence on the social returns to innovation.

Keywords: macroeconomic Effects of public Research; Fraunhofer-Gesellschaft; Regression-microfounded CGE-model (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cmp, nep-mac and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fisidp:72

DOI: 10.24406/publica-fhg-416768

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