Knowledge Bank

Economists have long emphasized the important role that new ideas play in promoting economic growth. Since formal scientific discovery is an important source of new ideas, it plays a potentially foundational role in the growth process. Due to its importance, a literature on the determinants of scientific output and productivity has emerged. Most of this literature focuses on the individual researcher or institution as the unit of analysis. Very little attention has been paid to the determinants of scientific output at the country-level. Toward a better understanding of the country-level relationship between investment in science and scientific output, this paper uses panel data from the World Bank and OECD to estimate the elasticity of scientific output with respect to investment in science. Our estimates range from 0.25 to 0.71. In addition to these contemporaneous estimates, we present evidence that past investment is also related to output. We conclude that there is an economically significant positive association between investment in science and scientific output. A sensitivity analysis reveals that this conclusion is quite robust. However, we make no attempt to establish causality, and problems with the data and econometric difficulties dictate that our estimates should be interpreted with caution.