The Effects of U.S. Public R&D on Global Growth

Last week, I mentioned a big Congressional Budget Office report estimating the economic impact of federal spending on non-defense research and development efforts (think basic and applied science at the National Science Foundation or National Institutes of Health, more engineering-like work at ARPA-H or ARPA-E, etc.). That report leaned heavily on the work of economists Andrew Fieldhouse and Karel Mertens, whose recent American Economic Review paper constitutes some of the best evidence we have on the economic returns to R&D spending in the US.

Now, Fieldhouse and Mertens have teamed up with three other researchers (Gustavo De Souza, Ishan Nath, and Valerie Ramey) to extend their work and estimate the global impact of US R&D spending. It stands to reason that science and engineering in the US should have effects abroad. When Bell Labs researchers invented the transistor, it didn’t take long for that to be powering radios in Japan. The team finds that the US captures only about half the returns to US-based R&D, with the other half benefiting the rest of the world. The US-only returns are already enormous, and well worth it even if you only care about US well-being. But if, like us at Coefficient, you try to look at well-being worldwide, this finding suggests US R&D is an even better deal than we thought.