[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/hal/spmain/hal-04097530.html
   My bibliography  Save this paper

Does mission-oriented funding stimulate private R&D? Evidence from military R&D for US states

Author

Listed:
  • Gianluca Pallante
  • Emanuele Russo
  • Andrea Roventini

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract
US military Research and Development (R&D) expenditures arguably represent the best example of mission-oriented policy. They are sizeable, with a clear-cut public purpose (national defense) and with the government being their exclusive beneficiary. Exploiting a longitudinal dataset linking public R&D obligations to private R&D expenditures for US states, we investigate the impact of defense R&D on privately-financed R&D. To address potential endogeneity in the allocation of funds, we use an instrumental variable identification strategy leveraging the differential exposure of US states to national shocks in federal military R&D. We document considerable "crowding-in" effects with elasticities in the 0.11-0.14 range. These positive effects extend also to the labor market, when focusing on employment in selected R&D intensive industries and especially for engineers.

Suggested Citation

  • Gianluca Pallante & Emanuele Russo & Andrea Roventini, 2020. "Does mission-oriented funding stimulate private R&D? Evidence from military R&D for US states," SciencePo Working papers Main hal-04097530, HAL.
    • Handle: RePEc:hal:spmain:hal-04097530
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-04097530
    as

    Download full text from publisher

    File URL: https://hal-sciencespo.archives-ouvertes.fr/hal-04097530/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nicholas Bloom & John Van Reenen & Heidi Williams, 2019. "A toolkit of policies to promote innovation," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 10.
    2. Viktor Slavtchev & Simon Wiederhold, 2016. "Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(2), pages 45-84, April.
    3. Edler, Jakob & Georghiou, Luke, 2007. "Public procurement and innovation--Resurrecting the demand side," Research Policy, Elsevier, vol. 36(7), pages 949-963, September.
    4. Dosi, Giovanni & Fagiolo, Giorgio & Roventini, Andrea, 2010. "Schumpeter meeting Keynes: A policy-friendly model of endogenous growth and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1748-1767, September.
    5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    6. Luis Garicano & Claudia Steinwender, 2016. "Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints," The Review of Economics and Statistics, MIT Press, vol. 98(5), pages 913-924, December.
    7. Sabrina T. Howell, 2017. "Financing Innovation: Evidence from R&D Grants," American Economic Review, American Economic Association, vol. 107(4), pages 1136-1164, April.
    8. Marco Bernardini & Selien De Schryder & Gert Peersman, 2020. "Heterogeneous Government Spending Multipliers in the Era Surrounding the Great Recession," The Review of Economics and Statistics, MIT Press, vol. 102(2), pages 304-322, May.
    9. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
    10. Lichtenberg, Frank R., 1995. "Economics of defense R&D," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 15, pages 431-457, Elsevier.
    11. Dominique Foray, 2018. "Smart specialization strategies as a case of mission-oriented policy—a case study on the emergence of new policy practices," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(5), pages 817-832.
    12. Fishback, Price & Kachanovskaya, Valentina, 2015. "The Multiplier for Federal Spending in the States During the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 75(1), pages 125-162, March.
    13. Mowery, David C., 2012. "Defense-related R&D as a model for “Grand Challenges” technology policies," Research Policy, Elsevier, vol. 41(10), pages 1703-1715.
    14. Valerie A. Ramey, 2011. "Identifying Government Spending Shocks: It's all in the Timing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 1-50.
    15. Enrico Moretti & Claudia Steinwender & John Van Reenen, 2019. "The intellectual spoils of war? Defense R&D, productivity and international spillovers," CEP Discussion Papers dp1662, Centre for Economic Performance, LSE.
    16. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    17. Ruttan, Vernon W., 2006. "Is War Necessary for Economic Growth?: Military Procurement and Technology Development," OUP Catalogue, Oxford University Press, number 9780195188042.
    18. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, vol. 29(4-5), pages 497-529, April.
    19. Guerzoni, Marco & Raiteri, Emilio, 2015. "Demand-side vs. supply-side technology policies: Hidden treatment and new empirical evidence on the policy mix," Research Policy, Elsevier, vol. 44(3), pages 726-747.
    20. Bettina Becker, 2015. "Public R&D Policies And Private R&D Investment: A Survey Of The Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 917-942, December.
    21. Richard R. Nelson, 1959. "The Simple Economics of Basic Scientific Research," Journal of Political Economy, University of Chicago Press, vol. 67(3), pages 297-297.
    22. Foray, D. & Mowery, D.C. & Nelson, R.R., 2012. "Public R&D and social challenges: What lessons from mission R&D programs?," Research Policy, Elsevier, vol. 41(10), pages 1697-1702.
    23. Raiteri, Emilio, 2018. "A time to nourish? Evaluating the impact of public procurement on technological generality through patent data," Research Policy, Elsevier, vol. 47(5), pages 936-952.
    24. Emi Nakamura & Jón Steinsson, 2018. "Identification in Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 32(3), pages 59-86, Summer.
    25. Daniel J. Wilson, 2009. "Beggar Thy Neighbor? The In-State, Out-of-State, and Aggregate Effects of R&D Tax Credits," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 431-436, May.
    26. Andrew C. Chang, 2018. "Tax policy endogeneity: evidence from R&D tax credits," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 27(8), pages 809-833, November.
    27. Emi Nakamura & J?n Steinsson, 2014. "Fiscal Stimulus in a Monetary Union: Evidence from US Regions," American Economic Review, American Economic Association, vol. 104(3), pages 753-792, March.
    28. Lichtenberg, Frank R, 1987. "The Effect of Government Funding on Private Industrial Research and Development: A Re-assessment," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 97-104, September.
    29. Ufuk Akcigit & John Grigsby & Tom Nicholas, 2017. "The Rise of American Ingenuity: Innovation and Inventors of the Golden Age," Working Papers 2017-6, Princeton University. Economics Department..
    30. Richard R. Nelson, 1982. "Government support of technical progress: Lessons from history," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 2(4), pages 499-514.
    31. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    32. Isaiah Andrews & James H. Stock & Liyang Sun, 2019. "Weak Instruments in Instrumental Variables Regression: Theory and Practice," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 727-753, August.
    33. Mariana Mazzucato & Mario Cimoli & Giovanni Dosi & Joseph Stiglitz & Michael Landesmann & Mario Pianta & Rainer Walz & Tim Page, 2015. "Which Industrial Policy Does Europe Need?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 50(3), pages 120-155, May.
    34. Lichtenberg, Frank R, 1984. "The Relationship between Federal Contract R&D and Company R&D," American Economic Review, American Economic Association, vol. 74(2), pages 73-78, May.
    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. Dosi, Giovanni & Lamperti, Francesco & Mazzucato, Mariana & Napoletano, Mauro & Roventini, Andrea, 2023. "Mission-oriented policies and the “Entrepreneurial State” at work: An agent-based exploration," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).

    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. Pallante, Gianluca & Russo, Emanuele & Roventini, Andrea, 2023. "Does public R&D funding crowd-in private R&D investment? Evidence from military R&D expenditures for US states," Research Policy, Elsevier, vol. 52(8).
    2. repec:spo:wpmain:info:hdl:2441/401t6job098n79ch91o9giov9d is not listed on IDEAS
    3. Dosi, Giovanni & Lamperti, Francesco & Mazzucato, Mariana & Napoletano, Mauro & Roventini, Andrea, 2023. "Mission-oriented policies and the “Entrepreneurial State” at work: An agent-based exploration," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    4. Thomas H. W. Ziesemer, 2021. "The Effects of R&D Subsidies and Publicly Performed R&D on Business R&D: A Survey," Hacienda Pública Española / Review of Public Economics, IEF, vol. 236(1), pages 171-205, March.
    5. repec:hal:spmain:info:hdl:2441/401t6job098n79ch91o9giov9d is not listed on IDEAS
    6. Chiappinelli, Olga & Giuffrida, Leonardo M. & Spagnolo, Giancarlo, 2023. "Public procurement as an innovation policy: Where do we stand?," ZEW Discussion Papers 23-002, ZEW - Leibniz Centre for European Economic Research.
    7. Kärnä, Anders & Karlsson, Johan & Engberg, Erik & Svensson, Peter, 2020. "Political Failure: A Missing Piece in Innovation Policy Analysis," Working Paper Series 1334, Research Institute of Industrial Economics, revised 21 Apr 2022.
    8. Viktor Slavtchev & Simon Wiederhold, 2011. "The Impact of Government Procurement Composition on Private R&D Activities," Jena Economics Research Papers 2011-036, Friedrich-Schiller-University Jena.
    9. Simon Wiederhold, 2012. "The Role of Public Procurement in Innovation: Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 43.
    10. Stojčić, Nebojša & Srhoj, Stjepan & Coad, Alex, 2020. "Innovation procurement as capability-building: Evaluating innovation policies in eight Central and Eastern European countries," European Economic Review, Elsevier, vol. 121(C).
    11. Iossa, Elisabetta & De Chiara, Alessandro, 2019. "Public Procurement as a Demand-side Policy: Project Competition and Innovation Incentives," CEPR Discussion Papers 13664, C.E.P.R. Discussion Papers.
    12. Ghisetti, Claudia, 2017. "Demand-pull and environmental innovations: Estimating the effects of innovative public procurement," Technological Forecasting and Social Change, Elsevier, vol. 125(C), pages 178-187.
    13. Dechezlepretre, Antoine & Einiö, Elias & Martin, Ralf & Nguyen, Kieu-Trang & Reenen, John Van, 2016. "Do tax incentives for research increase firm innovation? An RD design for R&D, patents and spillovers," LSE Research Online Documents on Economics 66428, London School of Economics and Political Science, LSE Library.
    14. Bell, Alex & Chetty, Raj & Jaravel, Xavier & Petkova, Neviana & Van Reenen, John, 2019. "Do tax cuts produce more Einsteins? The impacts of financial incentives vs. exposure to innovation on the supply of inventors," LSE Research Online Documents on Economics 121796, London School of Economics and Political Science, LSE Library.
    15. Antoine Dechezlepretre & Elias Einio & Ralf Martin & Kieu-Trang Nguyen & John Van Reenen, 2016. "Do tax incentives for research increase firm innovation? An RD design for R&D," GRI Working Papers 230, Grantham Research Institute on Climate Change and the Environment.
    16. Deleidi, Matteo & Mazzucato, Mariana, 2021. "Directed innovation policies and the supermultiplier: An empirical assessment of mission-oriented policies in the US economy," Research Policy, Elsevier, vol. 50(2).
    17. Enrico Moretti & Claudia Steinwender & John Van Reenen, 2019. "The intellectual spoils of war? Defense R&D, productivity and international spillovers," CEP Discussion Papers dp1662, Centre for Economic Performance, LSE.
    18. İrem Güçeri & Marko Köthenbürger & Martin Simmler, 2020. "Supporting Firm Innovation and R&D: What is the Optimal Policy Mix?," EconPol Policy Reports 20, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    19. A. Minniti & F. Venturini, 2014. "R&D Policy and Schumpeterian Growth: Theory and Evidence," Working Papers wp945, Dipartimento Scienze Economiche, Universita' di Bologna.
    20. Falck, Oliver & Wiederhold, Simon, 2013. "Nachfrageorientierte Innovationspolitik," Studien zum deutschen Innovationssystem 12-2013, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    21. Czarnitzki, Dirk & Hünermund, Paul & Moshgbar, Nima, 2020. "Public Procurement of Innovation: Evidence from a German Legislative Reform," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    22. Oliver Falck & Simon Wiederhold, 2013. "Demand-Oriented Innovation Policy: A Critical Review," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 51.

    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:hal:spmain:hal-04097530. 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: Contact - Sciences Po Departement of Economics (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.