Abstract
What is the economic rationale for investing in science? Based on an open economy model of creative destruction, we characterize four key factors of optimal investment in basic research: the stage of economic development, the strength of the manufacturing base, the degree of openness, and the share of foreign-owned firms. For each of these factors, we analyze its bearings on optimal basic research investment. We then show that the predicted effects are consistent with patterns observed in the data and discuss how the factor-based approach might inform basic research policies. (JEL H41, O30, O32, O33, O38).
| Original language | English |
|---|---|
| Pages (from-to) | 575-599 |
| Number of pages | 25 |
| Journal | Economic Inquiry |
| Volume | 59 |
| Issue number | 2 |
| Early online date | 20 Dec 2020 |
| DOIs | |
| Publication status | Published - 1 Apr 2021 |
Bibliographical note
Funding Information:We would like to thank Ufuk Akcigit, Clive Bell, Volker Hahn, Hans Haller, Martin Hellwig, Peter Howitt, Andreas Irmen, and seminar participants at the annual meeting of the SSES in Lausanne, at the CEPR workshop in Vienna, at the macroeconomic workshop of the German Economic Association, the University of Konstanz and ETH Zurich for valuable comments and suggestions.
ASJC Scopus subject areas
- General Business,Management and Accounting
- Economics and Econometrics
Access to Document
- Gersbach_Schetter_Schneider_Economic_Rationales-Science.PDF
This is the peer reviewed version of the following article: Gersbach, H., Schetter, U. and Schneider, M.T. (2021), MACROECONOMIC RATIONALES FOR PUBLIC INVESTMENTS IN SCIENCE. Econ Inq, 59: 575-599., which has been published in final form at https://doi.org/10.1111/ecin.12921. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation.