My dissertation, Political Economy of Technological Advancement, examines the political constraints on government Research and Development (R&D) policy and their effect on the efficiency of such policies.
Research that succeeds in boosting innovation typically does so only after a significant time lag, meaning that the results of such policy decisions may only become apparent after the government officeholders who made these decisions are up for reelection or have left office entirely. Thus, what motivates an incumbent officeholder to invest in such policies, which generate a return only after the incumbent can no longer derive any personal benefit (i.e., increased chances of reelection)? Moreover, unlike the outcomes of many other long-term policies (e.g., infrastructure construction or education reform), those of research and development (R&D) policies are much less visible to the public. My research focuses on three possible explanations: electoral benefit, rent-seeking, and strengthening future coalitions.
Findings Three significant findings emerged from my analysis.
First, under the assumption that policymakers value the economic outcomes of their policy, and that gains from holding office are not too high, there exists a separating equilibrium where high-skilled politicians invest in research and development, low-skilled politicians invest in less risky policies, while voters prefer pro-R&D politician. Survey experiments conducted in the USA and Russia are consistent with this result. This conclusion holds in a cross-country setting.
Second, politicians that are less concerned with reelection can generate rents from their R&D policy. In this case, government investment in R&D incentivizes the production of low-quality patents, that leads to the unraveling of the market for technologies. This finding is consistent with the evidence from the natural experiment in Russia.
Third, the government can influence long-term market power of companies, engaged in R&D, by providing direct government grants.
Contributions and Policy-implications
First, there is a large body of literature on the investigation of the impacts of government R&D policy on technological development, but no study examines the political constraints of incumbent engaging in long-term, risky and the not-very-visible policies. My dissertation suggests the number of incentives that could explain significant government funding directed to R&D.
Second, the study shows, that, depending on the set of political incentives, incumbents can choose specific tools of providing support for entities engaged in developing of new technologies, and these tools can determine the impact of government policy on the economy.
Third, it highlights the importance of political accountability for the technological development of countries.