تجزیه و تحلیل سیاسی اقتصادی از سیاست تحقیق و توسعه اتحادیه اروپا

This paper develops an open-economy growth model to analyze the growth and welfare effects of the European Union’s R&D policy. In the case of independent countries, each national government chooses the level of government-funded research non-cooperatively and fails to internalize the spillover effects across countries. Consequently, government-funded research is underprovided. In an economic union, the central government budget causes the common-pool problem and leads to an overprovision of government-funded research. Within this framework, we find that although an economic union dominates independent countries in economic growth, the welfare domination is ambiguous. In particular, there is a critical degree of cross-country spillover above (below) which an economic union dominates (is dominated by) independent countries in social welfare.

At the European Council of 2002 in Barcelona, the European Union (EU) sets an objective of increasing the research and development (R&D) effort in Europe to 3% of the EU’s GDP by 2010. Due to the externalities associated with R&D investment, the market equilibrium level of R&D spending is likely to be lower than the social optimum.1 Therefore, government intervention may be able to correct for this market failure. For example, in a quantitative analysis, Eaton et al. (1998) find that increasing R&D subsidy can lead to a significant increase in the EU’s per capita income.2 However, because the benefits of R&D policies are largely shared across countries, an individual country has little incentive to pursue these policies on its own. This conventional policy argument suggests a role for supranational government intervention, such as the EU for the European economies, on R&D policies.

This paper provides a politico-economic analysis on the provision of government-funded research in the EU and argues that there exists a tradeoff between government-funded research provided by an economic union (characterized by free-riding and overprovision) and independent countries (characterized by underprovision due to cross-country spillover). The theoretical analysis suggests that neither (a) the presence of cross-country spillover of R&D policies in the EU nor (b) a positive growth effect of the EU’s Framework Programme is a sufficient argument for supranational government intervention. However, despite ambiguity in policy prescription, the finding that an economic union dominates independent countries in welfare if and only if the degree of cross-country spillover is larger than a moderate value should be comforting to those advocating supranational government intervention by the EU on R&D policies. After all, a substantial degree of cross-country spillover is most likely to prevail in the real world, and R&D policy centralization by the EU should do more good than harm.