Social R&D: Does academic freedom contribute to improved societal outcomes?

The economics literature views R&D as an important conduit for growth because it generates new ideas that can be translated into technological innovations. Some of this R&D occurs in universities, making academic freedom an important part of this process. This literature ignores the potential role that academic research in the social sciences plays toward achieving non-commercial societal outcomes. We bridge this gap by proposing that academia generates social R&D. We posit that greater degrees of academic freedom allow for social R&D to flourish and be transformed into policies that improve societal conditions. We test our hypothesis by studying the relationship between academic freedom and inequality using panel data of 132 countries over the 1967–2018 period. We measure academic freedom using an index developed by the V-Dem Institute. Our econometric analysis suggests that an increase in the index is associated with a decrease in inequality. We employ instrumental variable and interactive fixed effects techniques to try to lend support to the causal relationship between academic freedom and inequality. We argue that this negative relationship can be explained by academia, predominantly the social sciences, exerting pressure on governments to enact policies that redistribute wealth. We find evidence in support of this mechanism using data from other sources.