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Basic and Applied Research: A Welfare Analysis

Author

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  • Kunihiko Konishi

    (Graduate School of Economics, Osaka University)

Abstract

This study constructs a variety expansion growth model that integrates basic research to analytically examine its effects on household welfare. In our approach, the research sector consists of applied and basic research components. The former creates blueprints and expands the variety of goods available for consumption, whereas the latter adds to the stock of public knowledge. The two sectors interplay through knowledge spillovers. The analysis reveals two key results. First, the steady-state welfare-maximizing level of basic research is below the steady-state growth-maximizing level. Second, a reduction in the level of basic research raises household welfare if the level of basic research is initially at the steady-state welfare-maximizing level.

Suggested Citation

  • Kunihiko Konishi, 2015. "Basic and Applied Research: A Welfare Analysis," Discussion Papers in Economics and Business 15-08, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1508
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    References listed on IDEAS

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    4. Gersbach, Hans & Sorger, Gerhard & Amon, Christian, 2018. "Hierarchical growth: Basic and applied research," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 434-459.
    5. Kunihiko Konishi, 2013. "Public Research Spending in an Endogenous Growth Model," Discussion Papers in Economics and Business 13-26, Osaka University, Graduate School of Economics.
    6. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2012. "Does intellectual monopoly stimulate or stifle innovation?," European Economic Review, Elsevier, vol. 56(4), pages 727-746.
    7. Angus C. Chu & Yuichi Furukawa, 2013. "Patentability and Knowledge Spillovers of Basic R&D," Southern Economic Journal, John Wiley & Sons, vol. 79(4), pages 928-945, April.
    8. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
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    10. Gersbach, Hans & Schneider, Maik T., 2015. "On the global supply of basic research," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 123-137.
    11. Cozzi, Guido & Galli, Silvia, 2021. "Privatization of knowledge: Did the U.S. get it right?," Economic Modelling, Elsevier, vol. 98(C), pages 179-191.
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    15. Hans Gersbach & Maik Schneider & Olivier Schneller, 2013. "Basic research, openness, and convergence," Journal of Economic Growth, Springer, vol. 18(1), pages 33-68, March.
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    Cited by:

    1. Furukawa, Yuichi & Lai, Tat-kei & Sato, Kenji, 2017. "Receptivity and Innovation," MPRA Paper 81536, University Library of Munich, Germany.

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    More about this item

    Keywords

    Basic research; Innovation; Endogenous growth; Welfare analysis;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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