When basic research is cut, less new knowledge and innovation emerges, which slows productivity growth and lowers wages and tax revenue after a long lag. Finland has a statutory target of raising R&D spending to 4% of GDP by 2030.
Disputed assumption – may not work this way in reality
Economists disagree whether this effect works, and how strongly.
The social return on research is widely believed to be high, but estimates vary a lot and rest on long time series from different countries. How much a cut to Finnish basic research lowers tax revenue, and when, is very uncertain – part of the effect can also leak abroad.
Of every 100 euros that a change to “Basic research” saves or brings in, 30 € is lost as revenue on the line “Personal income tax”, starting after 7 yrs and building up to its full size over 10 yrs. (The other way round if the change adds spending or cuts taxes.)
Speculative assumption; the effect only starts to show in the 2030s.
How the effect builds up over time
Share of the change's own effect on the balance, year by year while the change continues: −15% means 15% of a saving comes back as cost (or 15% of extra revenue is lost). With the default values.
You can switch the effect on or off and adjust its assumptions in the simulator under Cause-and-effect chains.