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 costs 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 major technology advances, highly open countries will reduce basic research as such imports become particularly valuable.
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Journal Of Economic Groth
The Journal of Economic Growth is a peer-reviewed academic journal covering research in economic growth and dynamic macroeconomics. It was established in 1996 and is published by Springer Science+Business Media. The journal deals with both theories and their empirics, and examines the entire array of subject areas in economic growth, including neoclassical and endogenous growth models, growth and income distribution, human capital, fertility, trade, development, migration, money, the political e