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- Working Paper
Rights / licenseIn Copyright - Non-Commercial Use Permitted
We analyze public investment in basic research in a multi-country, multiindustry environment with international trade. In our economy, basic research generates ideas which private rms take up in applied research to develop new varieties. Such development requires industry-speci c 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 ine cient 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 insu ciently directed to support innovation in complex, high-tech industries Show more
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Subjectbasic research; economic growth; knowledge spillover
Organisational unit03729 - Gersbach, Hans / Gersbach, Hans
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