This talk will be built on two projects.
 
The first one (with completed draft) is entitled “Innovation Networks and R&D Allocation,” in which we study the cross-sector allocation of R&D resources in a multisector growth model with an innovation network, where one sector’s past innovations may benefit other sectors’ future innovations. Theoretically, we solve for the optimal allocation of R&D resources. We show that a planner valuing long-term growth should allocate more R&D toward central sectors in the innovation network, but the incentive is muted in open economies that benefit more from foreign knowledge spillovers. We derive sufficient statistics for evaluating the welfare gains from improving R&D allocation. Empirically, we build the global innovation network based on patent citations and establish its empirical relevance for knowledge spillovers. We evaluate R&D allocative efficiency across countries using model-based sufficient statistics. Japan has the highest allocative efficiency among the advanced economies. For the U.S., improving R&D allocative efficiency could generate more than 8% welfare gains.
 
The second project (in-progress, no draft) is entitled “The Value of Science.” The project attempts to empirically captures how scientific discoveries drive technological breakthroughs using a network structure. The key novelty of the approach, overcoming the problem of sparce citations between science and patents, is the ability to use textual analysis methods for the construction—allowing us to form the science-technology network for more than a century. We document novel patterns on the cyclicality behaviors in science and technological fields and their interrelations. This new analysis has the potential to help us understand long-term trends in science and innovation and optimal innovation policies.