IDEAS home Printed from https://ideas.repec.org/p/usg/econwp/201816.html
   My bibliography  Save this paper

From Local to Global: A Unified Theory of Public Basic Research

Author

Listed:
  • Gersbach, Hans
  • Schetter, Ulrich
  • Schmassmann, Samuel

Abstract

We analyze public investment in basic research in a multi-country, multi-industry environment with international trade. In our economy, basic research generates ideas which private firms take up in applied research to develop new varieties. Such development requires industryspecific know-how. A country's current specialization in international trade thus determines which ideas can be commercialized domestically. We demonstrate that the equilibrium is consistent with key patterns observed from the data. We then compare basic research investments of national governments with optimal investments of a global social planner. We show that national investments are inefficient along three dimensions: (1) There is typically too little total investment in basic research. (2) Basic research is too heavily concentrated in industrialized countries. (3) And basic research is potentially insufficiently directed to support innovation in complex, high-tech industries.

Suggested Citation

  • Gersbach, Hans & Schetter, Ulrich & Schmassmann, Samuel, 2018. "From Local to Global: A Unified Theory of Public Basic Research," Economics Working Paper Series 1816, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2018:16
    as

    Download full text from publisher

    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1816.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sebastián Bustos & Charles Gomez & Ricardo Hausmann & César A Hidalgo, 2012. "The Dynamics of Nestedness Predicts the Evolution of Industrial Ecosystems," PLOS ONE, Public Library of Science, vol. 7(11), pages 1-8, November.
    2. Ricardo Hausmann & César Hidalgo, 2011. "The network structure of economic output," Journal of Economic Growth, Springer, vol. 16(4), pages 309-342, December.
    3. Ulrich Schetter, 2020. "Quality Differentiation, Comparative Advantage, and International Specialization Across Products," CID Working Papers 126a, Center for International Development at Harvard University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cozzi, Guido & Galli, Silvia, 2022. "Covid-19 Vaccines, Innovation, and Intellectual Property Rights," GLO Discussion Paper Series 1095, Global Labor Organization (GLO).
    2. Ulrich Schetter & Adrian Jäggi & Maik T. Schneider, 2021. "Inequality, Openness, and Growth through Creative Destruction," CID Working Papers 130a, Center for International Development at Harvard University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Balland, Pierre-Alexandre & Broekel, Tom & Diodato, Dario & Giuliani, Elisa & Hausmann, Ricardo & O'Clery, Neave & Rigby, David, 2022. "Reprint of The new paradigm of economic complexity," Research Policy, Elsevier, vol. 51(8).
    2. Ulrich Schetter & Dario Diodato & Eric Protzer & Frank Neffke & Ricardo Hausmann, 2024. "From Products to Capabilities: Constructing a Genotypic Product Space," Papers in Evolutionary Economic Geography (PEEG) 2419, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jun 2024.
    3. Gersbach, Hans & Schetter, Ulrich & Schmassmann, Samuel, 2023. "From local to global: A theory of public basic research in a globalized world," European Economic Review, Elsevier, vol. 160(C).
    4. Balland, Pierre-Alexandre & Broekel, Tom & Diodato, Dario & Giuliani, Elisa & Hausmann, Ricardo & O'Clery, Neave & Rigby, David, 2022. "The new paradigm of economic complexity," Research Policy, Elsevier, vol. 51(3).
    5. Viktor Stojkoski & Zoran Utkovski & Ljupco Kocarev, 2016. "The Impact of Services on Economic Complexity: Service Sophistication as Route for Economic Growth," PLOS ONE, Public Library of Science, vol. 11(8), pages 1-29, August.
    6. Sèna Kimm Gnangnon, 2023. "Do unilateral trade preferences help reduce poverty in beneficiary countries?," International Journal of Economic Policy Studies, Springer, vol. 17(1), pages 249-288, February.
    7. Hidalgo, César A., 2023. "The policy implications of economic complexity," Research Policy, Elsevier, vol. 52(9).
    8. R. Church & J. C. Duque & D. E. Restrepo, 2020. "The p-Innovation ecosystems model," Papers 2008.05885, arXiv.org.
    9. Jules-Eric Tchapchet-Tchouto, 2024. "An interpretation of the economic structural change decomposition versus sustainable growth path challenge : An empirical assessment in Asia-Pacific economies," Economics Bulletin, AccessEcon, vol. 44(1), pages 235-250.
    10. Eri Yamada & Pierre-Alexandre Balland & Tetsu Kawakami & Jiro Nemoto, 2022. "The structure and dynamics of the auto-parts industry: Evidence from Japan," Papers in Evolutionary Economic Geography (PEEG) 2217, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Aug 2022.
    11. Isaac Ketu & Arsene Mouongue Kelly & Jules-Eric Tchapchet Tchouto, 2024. "Does economic complexity reduce the size of the shadow economy in African countries?," SN Business & Economics, Springer, vol. 4(1), pages 1-27, January.
    12. Lapatinas, Athanasios & Garas, Antonios & Boleti, Eirini & Kyriakou, Alexandra, 2019. "Economic complexity and environmental performance: Evidence from a world sample," MPRA Paper 92833, University Library of Munich, Germany.
    13. Lapatinas, Athanasios, 2019. "The effect of the Internet on economic sophistication: An empirical analysis," Economics Letters, Elsevier, vol. 174(C), pages 35-38.
    14. Freire, Clovis, 2019. "Economic diversification: A model of structural economic dynamics and endogenous technological change," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 13-28.
    15. Castañeda, Gonzalo & Pietronero, Luciano & Romero-Padilla, Juan & Zaccaria, Andrea, 2022. "The complex dynamic of growth: Fitness and the different patterns of economic activity in the medium and long terms," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 231-246.
    16. Sena Kimm Gnangnon, 2021. "Economic complexity and poverty in developing countries," Economic Affairs, Wiley Blackwell, vol. 41(3), pages 416-429, October.
    17. Antonis Adam & Antonios Garas & Marina-Selini Katsaiti & Athanasios Lapatinas, 2023. "Economic complexity and jobs: an empirical analysis," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 32(1), pages 25-52, January.
    18. Sena Kimm Gnangnon, 2022. "Effect of economic complexity on services export diversification: do foreign direct investment inflows matter?," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 21(3), pages 413-437, June.
    19. Bustos, Sebastián & Yıldırım, Muhammed A., 2022. "Production Ability and economic growth," Research Policy, Elsevier, vol. 51(8).
    20. Neagu Olimpia & Neagu Mădălin-Ioan, 2024. "Economic Complexity as a Determinant of Green Development in the Central and Eastern European (CEE) Countries," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 34(3), pages 108-132.

    More about this item

    Keywords

    applied research; basic research; economic growth; international trade; knowledge spillover; optimal policy;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usg:econwp:2018:16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/vwasgch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.