Federal R&D: Analyzing the Shift From Basic and Applied Research Toward Development
Abstract/Contents
- Abstract
- United States Federal Government research and development spending has shifted in recent years away from basic and applied research and toward development spending. Development is later in the product creation cycle and typically performed by private firms. A 2008 spike in development grants to private firms meant to combat the recession caused the increase, but the level going to private firms has only continued to rise after the recession ended and during the recovery. This paper examines potential explanations for this sudden and sustained increase. I present the economic theory regarding the positive externalities of research and development spending, and argue that basic research provides the largest spillover benefit externalities and is the most under selected in the private market equilibrium. Therefore, economic theory suggests that government focus a greater portion of its spending on basic research, and reverse the recent trend of increasing development grants to the private sector. Spillover benefits of development research have been largely internalized by patent policy that provides monopoly power to firms with innovative products, but intellectual property rights cannot internalize the larger and more powerful basic research externalities because basic research affects many markets. The private sector will never stop funding development research, so I argue that government should allocate more funds to the undervalued basic research fields to help correct the market failure.
Description
| Type of resource | text |
|---|---|
| Date created | May 2013 |
Creators/Contributors
| Author | Shapiro, Sam | |
|---|---|---|
| Primary advisor | Taylor, John | |
| Degree granting institution | Stanford University, Department of Economics |
Subjects
| Subject | Stanford Department of Economics |
|---|---|
| Subject | United States |
| Subject | federal research and development spending |
| Subject | private firms |
| Genre | Thesis |
Bibliographic information
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Preferred citation
- Preferred Citation
- Shapiro, Sam. (2013). Federal R&D: Analyzing the Shift From Basic and Applied Research Toward Development. Stanford Digital Repository. Available at: https://purl.stanford.edu/ny293fx8572
Collection
Stanford University, Department of Economics, Honors Theses
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