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

Enrico Moretti, Claudia Steinwender and John van Reenen

No 26483, NBER Working Papers from National Bureau of Economic Research, Inc

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 represents 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.

JEL-codes: O3 O30 O31 O33 O38 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-cse, nep-eff, nep-gro, nep-ino and nep-tid
Note: IO ITI LS PE PR
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Citations: View citations in EconPapers (42)

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Related works:
Journal Article: 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 (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)
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