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We rely on previous research and highlight the subtle pathways by which state-funded basic research has the potential to affect economic growth and livings standards in the long run. In so doing we acknowledge that basic research itself does not immediately lead to marketable products. The channel that we focus on is that basic research paves the way for profit-driven applied R&D. Without a sound knowledge base about how nature works (the “epistemic base”), new technologies would be difficult to develop and firms would be less willing to invest in applied R&D in the first place. In other words, government-funded basic research has a strong effect on the productivity of private profit-driven applied research. In many cases, government-funded basic research is even a necessary input for profit-driven applied R&D.

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