| Abstract: | Because the returns to successful industrial research generally enjoy a larger scale economy than that to successful scientific research, this paper shows that while economic integration increases R&D employment, it may not raise the rate of long-run economic growth owing to the shift of resources from basic scientific research to applied industrial research. In the long run, the pool of opportunity created by the former ultimately regulates the efficiency of the latter. The model also suggests a reduced incentive to subsidize basic research as a second factor that may contribute to slower technological progress after economic integration. |
