Estimating the Economic and Budgetary Effects of Research Investments

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Many US federal agencies model the economic and budgetary effects of research and development (R&D) investments -- both public R&D and private R&D -- as if R&D were the same as any other form of investment, such as physical capital investment. However, in recent decades a broad base of evidence has developed suggesting that such modeling may result in projections that are not well-aligned with the actual economic and budgetary effects of R&D investments. In this paper, we attempt to synthesize the economic evidence relevant to estimating the economic and budgetary effects of R&D, and examine how and where this research literature could potentially be incorporated into the standard projections produced by various federal agencies.