On the global supply of basic research

Hans Gersbach, Maik T. Schneider

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In a two-country Schumpeterian growth model, we study the incentives for basic research investments by governments in a globalized world. A country’s basic research investments increase with the country’s level of human capital and decline with its own market size. This may explain why some smaller countries invest so much in basic research. Compared with the optimal investments achievable when countries coordinate their basic research policies, a single country may over-invest in basic research. However, the total amount of decentralized basic research investments is always below the socially optimal investment level, which justifies policy coordination in this area.
Original languageEnglish
Pages (from-to)123-137
Number of pages15
JournalJournal of Monetary Economics
Early online date12 Mar 2015
Publication statusPublished - 1 Oct 2015


  • Basic research
  • Public goods
  • Economic growth
  • Coordination of governments


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