The Intellectual Spoils of War? Defense R&D, Productivity, and International Spillovers

Enrico Moretti, Claudia Steinwender and John van Reenen
Additional contact information
Enrico Moretti: University of California at Berkeley, NBER, and CEPR

The Review of Economics and Statistics, 2025, vol. 107, issue 1, 14-27

Abstract: We examine the impact of government funding for R&D—and defense-related R&D in particular—on privately conducted R&D and its ultimate effect on productivity growth. We estimate longitudinal models that relate privately funded R&D to lagged government-funded R&D using industry-country level data from OECD countries and firm level data from France. To deal with the potentially endogenous allocation of government R&D funds, we use changes in predicted defense R&D as an instrumental variable. In many OECD countries, expenditures for defense-related R&D represent by far the most important form of public subsidies for innovation. In both datasets, we uncover evidence of “crowding in” rather than “crowding out,” as increases in government-funded R&D for an industry or a firm result in significant increases in private sector R&D in that industry or firm. On average, a 10% increase in government-financed R&D generates a 5% to 6% additional increase in privately funded R&D. We also find evidence of international spillovers, as increases in government-funded R&D in a particular industry and country raise private R&D in the same industry in other countries. Finally, we find that increases in private R&D induced by increases in defense R&D result in productivity gains.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1162/rest_a_01293

Related works:
Working Paper: The intellectual spoils of war? Defense R&D, productivity, and international spillovers (2025)
Working Paper: The intellectual spoils of war? Defense R&D, productivity and international spillovers (2019)
Working Paper: The Intellectual Spoils of War? Defense R&D, Productivity and International Spillovers (2019)
Working Paper: The Intellectual Spoils of War? Defense R&D, Productivity and International Spillovers (2019)
Working Paper: The intellectual spoils of war? Defense R&D, productivity and international spillovers (2019)
Working Paper: The Intellectual Spoils of War? Defense R&D, Productivity and International Spillovers (2019)
Working Paper: The Intellectual Spoils of War? Defense R&D, Productivity and International Spillovers (2019)
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:tpr:restat:v:107:y:2025:i:1:p:14-27

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().