The Impact of Federal Life Science Funding on University R&D

Federal funding for academic research, especially in the life sciences, has risen rapidly over the last decade.  In 2009, federally financed academic R&D expenditures totaled over $31 billion, with over $18 billion spent on life sciences research. The American Recovery and Reinvestment Act of 2009 (ARRA) provided an additional $8.2 billion in federal resources to fund life science research at universities and other academic centers. Proponents of federal research funding often justify this level of public expenditure by noting that publicly-funded biomedical research generates knowledge that can be used to prevent and treat diseases, and also expands the scientific workforce. Under ARRA, increases in federal funding for extramural biomedical research are further justified as a means to speed up economic recovery, by increasing employment and overall spending at universities receiving this funding, and ultimately supporting the industries that provide goods and services to the university community. This research aims to evaluate whether these potential benefits of federal funding are realized in practice. In particular, the research uses multivariate regression models and several years of data from U.S. universities and their local economies to examine the potential benefits of federal life science R&D funding. It first examines the impact of federal funding on R&D spending at US universities. If federal funding were the sole source of R&D funding at universities, a $1 increase in federal funding would increase total university R&D spending by exactly $1. However, universities rely on various public and private funding sources outside the federal government. As a result, federal funding could have “crowd-in” effects by encouraging higher levels of non-federal investment in academic R&D, or it could have a “crowd-out” effect, discouraging funding from other sources.
Next, the research considers how impacts on academic R&D spending (if any) translate into impacts on production of knowledge.  Explicit knowledge production is measured in several ways: quantity and quality of academic publications, quantity and quality of patents, and alliances generated with industry (e.g., pharmaceutical licensing).  In addition, if federal funding for academic biomedical research is successful in expanding the scientific workforce, we should also see a relative increase in the university’s production of skilled graduates.  Finally, it estimates the impact of federal funding on employment and earnings at US universities and on the local economies in which these universities are located, to shed light on whether increased federal funding can speed up economic recovery.
Principal Investigator:    Margaret E. Blume-Kohout, PhD, Economics
Project Dates:                  09/15/2011 to 08/31/2012