additional private sector investment. Most recent studies find that each dollar of foregone tax revenue through

the R&E Tax Credit causes firms to invest at least a dollar in R&D, with some studies finding a benefit to cost

ratio of 2 or 2.96.”

LINK IT UP

Visit this website (http://openstax.org/l/REtaxcredit) for more information on how the R&E Tax Credit

encourages investment.
316 13 • Positive Externalities and Public Goods

Policy #3 Cooperative Research

State and federal governments support research in a variety of ways. For example, United for Medical

Research, a coalition of groups that seek funding for the National Institutes of Health, (which is supported by

federal grants), states: “NIH-supported research added $69 billion to our GDP and supported seven million

jobs in 2011 alone.” The United States remains the leading sponsor of medical-related research, spending
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