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

RePEc Short ID: pfi368
ORCID iD: 0000-0002-3548-1153

Fieldhouse, Andrew J.; Mertens, Karel; Nath, Ishan; Ramey, Valerie A.; de Souza, Gustavo

doi:10.24149/wp2622

Working Paper

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

Abstract: This paper provides the first causal estimates of the global social returns to U.S. public R&D. We use a narrative identification strategy to quantify the effects of exogenous shocks to U.S. R&D appropriations on the dynamic TFP response of 69 foreign economies from 1980–2019. A U.S. R&D appropriations shock equal to 1 percent of the federal R&D capital stock raises foreign TFP by approximately 1 percent after 12 years. This response is driven primarily by nondefense rather than defense R&D and is concentrated in non-OECD economies. These patterns are most consistent with diffusion occurring through openly accessible scientific content, capital-embodied trade and technological leapfrogging by economies further from the global frontier. A back-of-the-envelope calculation suggests that the global social returns to U.S. public nondefense R&D are roughly twice as large as the domestic returns, meaning the U.S. captures about half of these productivity benefits.

JEL Classification: E62; F62; O33; O38; O47;

https://doi.org/10.24149/wp2622