Suchergebnisse

We explore optimal and politically feasible growth policies in the form of basic research investments and taxation. Basic research is a public good that benefits innovating entrepreneurs, but its provision and financing also affect the entire economy – in particular, occupational choices of potential entrepreneurs, wages, dividends, and aggregate output. We show that the impact of basic research on the general economy rationalizes a taxation pecking order to finance basic research. More specifically, in a society with desirably dense entrepreneurial activity, a large share of funds for basic research should be financed by labor taxation, while a minor share should be left to profit taxation. Such tax schemes will induce a significant proportion of agents to become entrepreneurs, thereby rationalizing substantial investments in basic research that fosters their innovation prospects. These entrepreneurial economies, however, may make a majority of workers worse off, giving rise to a conflict between efficiency and equality. We discuss ways of mitigating this conflict and thus strengthening the political support for growth policies.

We study a model where economic growth is fueled by public basic-research investment and the importation of leading technology from foreign countries. In each period, the government chooses the amount of basic research, balancing the cost and benefits of stimulating growth through both channels. We establish the existence of steady states and the long-run share of technologically advanced sectors in the economy. Then, we explore how different degrees of openness affect long-term incentives to invest in basic research. Our main insight is that higher openness tends to encourage more investment in basic research which, in turn, yields a larger share of leading sectors. If, however, there are prospects of importing large technology advancements, highly open countries will reduce basic research as such imports become particularly valuable.

We study a model where economic growth is fueled by public basic-research investment and the importation of leading technology from foreign countries. In each period, the government chooses the amount of basic research, balancing the cost and benefits of stimulating growth through both channels. We establish the existence of steady states and the long-run share of technologically advanced sectors in the economy. Then, we explore how different degrees of openness affect long-term incentives to invest in basic research. Our main insight is that higher openness tends to encourage more investment in basic research which, in turn, yields a larger share of leading sectors. If, however, there are prospects of importing large technology advancements, highly open countries will reduce basic research as such imports become particularly valuable.

We augment a Schumpeterian growth model with a public basic-research sector to examine how much a country should invest in basic research. We find that the closer the country is to the world's technological frontier the more the government should invest in basic research. Basic-research expenditures are increasing with a country's degree of openness as long as innovation sizes are small. We provide possible explanations for the empirical evidence available on basic-research expenditures across countries.