Economic returns from investments in research and training

This paper summarizes what is known about the economic returns to investments in advanced scientific research and training. Increasing higher education and national research and development (R&D) investments have become important components of the economic growth strategies of industrialized countries and also many developing countries. Recent studies by economists indicate that the social rate of return from investments in new industrial technology in developed countries seems to be very high and that technological change in many industries has been based on recent academic research. Without recent academic research, it seems likely that there would have been a substantial reduction in the value of society's economic output. Most of the research concerning the economic returns from R&D in developing countries has focused on agriculture. The estimated social rates of return are very high, often 50 percent or more. This is not true, however, for all R&D in developing countries. The effective utilization of science and technology has been hampered by low levels of investments, distorted prices and markets, sluggish export growth, lack of competition, short-sighted laws and regulations and other negative aspects of a country's economic environment. Although estimates have been made of the economic returns from broad categories of education and training, little seems to be known about the social rate of return from a country's investments in highly specialized types of scientific training.