The effect of public funding on research output: the New Zealand Marsden Fund

We should fund research.   
But trying to choose the best   
Doesn’t work too well. 

The Marsden Fund is the premiere funding mechanism for blue skies research in New Zealand. In 2014, $56 million was awarded to 101 research projects chosen from among 1222 applications from researchers at universities, Crown Research Institutes and independent research organizations. This funding mechanism is similar to those in other countries, such as the European Research Council.

This research measures the effect of funding receipt from the New Zealand Marsden Fund using a unique dataset of funded and unfunded proposals that includes the evaluation scores assigned to all proposals. This allows us to control statistically for potential bias driven by the Fund’s efforts to fund projects that are expected to be successful, and also to measure the efficacy of the selection process itself. We find that Marsden Funding does increase the scientific output of the funded researchers, but that there is no evidence that the final selection process is able to meaningfully predict the likely success of different proposals.

This paper was also published as an NBER working paper.