Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171618
Authors: 
Gersbach, Hans
Schneider, Maik T.
Year of Publication: 
2013
Series/Report no.: 
Economics Working Paper Series 13/175
Abstract: 
In this paper we study the incentives for basic-research investments by governments in a globalized world. For this purpose, we develop a two-country Schumpeterian growth model in which each country chooses its basic-research investments. We find that 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 the large basic-research investments by small open economies. Compared with the optimal investments achievable when countries coordinate their basic-research policies, a single country may over-invest in basic research. However, in the decentralized case the total amount of basic-research investments is always below the socially optimal investment level, which justifies policy coordination in this area.
Subjects: 
basic research
public goods
economic growth
coordination of governments
JEL: 
O31
O38
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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