Modeling and Policy Analysis for the U.S. Science Sector

Jacques Ngoie () and Arnold Zellner
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Jacques Ngoie: Department of Economics, University of Pretoria

No 201207, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper analyzes the production process of scientific outputs and its implications on the U.S. economy using variants of a disaggregated Marshallian Macroeconomic Model (MMM). Federal spending on scientific activities produces innovation which we measure using the number of patents awarded. Additionally, this study makes use of the Bass diffusion model to investigate how innovative patents generate new products that attract new firms in existing sectors of the U.S. economy. Firms are assumed to be Bayesian learners while forming expectations about product prices. Using a set of policy simulations, this research provides measured information on how selected science policies may affect sectoral growth of the U.S. economy. Moreover, issues such as bifurcation pertaining to dynamic models are thoroughly addressed in this paper. Among others, our findings suggest that federal spending on applied research has larger shortrun growth enhancement effects than spending on development or basic research. The return of current federal spending on applied research depends largely on past spending on basic research, something that is well captured through the lag structure imposed in our model. Recipients of federal grants for basic research often lay foundation for outstanding applied research.

Keywords: Disaggregated Marshallian Macroeconomic Model; Bass Diffusion Model; Transfer Functions; and Bayesian Learners (search for similar items in EconPapers)
JEL-codes: E27 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2012-02
New Economics Papers: this item is included in nep-ino
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