Basic Research Inputs and Total Factor Productivity:A Theoretical Explanation of the Innovation Dilemma
The failure of research inputs to raise total factor productivity(TFP)is not a China-specific phenomenon.This paper constructs a multisectoral compound growth model that includes heterogeneous innovation.It uses China's real economic data and numerical simulation methods and finds that although an increase in basic research inputs directly raises the productivity of the basic research sector and positively affects TFP,due to the shift of high-skilled labor resources from the applied research sector to the basic research sector,the return rate of financial capital invested in applied research decreases,which has a greater negative impact on TFP.At the cur-rent level of basic research inputs,the economic growth effect of basic research is offset,leading to a downward trend in the economy's overall TFP growth rate.However,increased basic re-search inputs have welfare-enhancing effects in the long run.
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