Social Rewards in Science and Economic Growth

Abstract

In this paper we put forward a model of basic research and long-run economic growth in which the incentives of social reward to scientific work may produce increasing returns and multiple equilibria. The state organizes production of new knowledge - a public good that improves firms technology - with taxes on the private sector. Scientists compete with one another to attain priority over a discovery and be awarded both a real prize and prestige in the scientific community. Also, scientists derive job motivation from dedication to science which provides social status. Analysis of the model shows, on the one hand, a low equilibrium where the economy is endowed with a small science sector, researchers have high relative income but low prestige, and competition for discoveries is weak. On the other hand, there is a high equilibrium where the economy has a large science sector, scientists obtain for new findings high prestige but lower relative salaries and, as the e¤ect of creative destruction is strong, there is fierce competition among researchers. Comparative statics shows that if the scientific infrastructure is poor, policies that increase the marginal benefits from a discovery have perverse e¤ects, while policies aimed at improving the selection mechanism of researchers work well. The same policies have opposite effects at the high steady state.