Funding R&D in Developing Countries
The Impact of US Cuts
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This post was jointly written by me and Caroline Fry, assistant professor at the University of Hawai’i at Manoa.
This article will be updated as the state of the academic literature evolves; you can read the latest version here.
The US government plays a significant role in supporting research and development (R&D) in developing countries. The US, for example, funds international collaborations, fellowships and training programs, research infrastructure, direct grants to international researchers, and incentives for US scientists to address global development challenges. Cuts to programs like this are likely to have a significant negative impact on this kind of research.
In this post we make three points. First, the social return on investment of R&D in developing countries may be extraordinarily high. Second, a significant portion of this return flows back to the US. Third, US support is a large share of developing country R&D, but a very small share of US federal spending.
R&D in Developing Countries Probably Has Very High Social ROI
As a starting point, let us consider the returns to R&D in high income countries. As discussed in this post, a variety of evidence is consistent with every dollar of domestic R&D spending by the US government generating $2-5 of benefits via its impact on economic growth. If we try to put a dollar value on other benefits of technological progress, such as improved health, then we might plausibly double this social ROI.
We have some good reasons to believe that supporting R&D in developing countries could be just as high yielding as domestic R&D. It’s sometimes assumed that developing countries don’t need domestic science and research capabilities, because they can benefit from R&D investments made in high income countries. But that isn’t always the case. Sometimes the research conducted in one country simply isn’t applicable in others. As we discussed in our earlier post When research over there isn’t useful here, diseases, environments, and even social systems vary across countries. This suggests there is scope for R&D in developing countries to generate benefits that won’t happen by default as a result of research done in high income countries.
At the same time, there are also reasons to think the returns to R&D in developing countries might actually be higher than domestic R&D. The burden of knowledge hypothesis, for example, proposes that innovation becomes more challenging as a field grows more mature, because unsolved problems require increasingly more detailed knowledge to solve. The kinds of R&D that is done less often in high income countries like the USA, such as research on neglected diseases and agricultural systems in developing countries, might be less mature, and hence have less of a “burden of knowledge.”
Empirically, we have a few papers consistent with the idea that US funding for R&D in developing countries has a high ROI, even relative to the tall standards for domestic R&D. Alston, Pardey, and Rao (2021) focus on estimating the ROI of agricultural R&D in developing countries, both performed by the network of Consultative Group for International Agricultural Research (CGIAR) international research centers (which are supported in part by the US government), and by developing country public sectors. Across 200+ studies, the median value for the ROI of R&D at CGIAR was around $9.5 in benefits (mostly via increased agricultural production) for every dollar in spending. In a different analysis, they estimate how much agricultural production would have been lost over 1960-2015 if the productivity of agriculture in developing countries had been stuck at the level of 1961, since these are the benefits that are plausibly sacrificed without agricultural R&D. If they divide the value of this lost production by the total cost of agricultural R&D performed by CGIAR and developing country governments, this implies the developing world gained $13.70 in agricultural production for every dollar invested in R&D. Whichever approach one takes to estimate the ROI of agricultural R&D in developing countries, the results compare favorably to the average of around $2-5 that studies have found for the marginal dollar of US R&D.
While Alston, Pardey, and Rao (2021) estimate the historic returns of agricultural R&D in developing countries, Rosegrant et al. (2023) look forward. They consider various scenarios around how increased spending on agricultural R&D in the developing world translates into yield gains, and then use economic models of the agricultural economy to estimate the value of these gains. This exercise finds even larger gains, with every dollar of R&D generating $29-$35 in benefits.
Some other studies also find high returns in other domains. Fry and Ganguli (2024) look at the impact of the AIDS International Research Training Program run by NIH, which provides training at top US institutions to LMIC scientists.1 Ganguli and Fry show that when program graduates of the program return to their home institutions, their peers, working the same department, also appear to benefit. Ganguli and Fry’s model implies this training program induces new scientific publications at a cost of around $10,000 per publication. This is potentially orders of magnitude cheaper than the cost per publication in the USA.2
Finally, a 2024 report by Policy Cures estimated that a set of medical advances for the treatment of neglected diseases saved 598mn years of life (across millions of people who did not die prematurely) between 2000 and 2024. Policy Cures estimates the cost of R&D for all research related to the neglected diseases was $97.9bn between 1994 and 2022. If we value a lost year of life at $20,000 (which they argue is reasonable, though note it is far less than values used in the USA), then this implies a social ROI of roughly $122 in benefits (over 2000-2024) for every dollar spent on R&D for neglected diseases (over 1994-2022). And they also note we can expect far more lives to be saved in the future from these drugs. That said, it is important to note that while this research targeted developing country problems, a large portion of this research was conducted in high income countries. Still, it is suggestive of the kinds of social returns that are possible with the kind of R&D that would likely be prioritized by developing countries.
US Self-Interest and R&D in Developing Countries
Of course, the problem with R&D has always been not that it has low returns, but that most of the benefits flow to people who aren’t the R&D performer. That’s probably even more true for R&D performed abroad: a large share of the benefits of US funded R&D performed in developing countries do not directly flow to US taxpayers. Nonetheless, it’s very likely the US captures at least some fraction of the benefits. Given that those benefits may be extremely large, capturing even a small fraction of them can mean supporting developing country science is a good investment even when only considering US interests. Here we lay out some of the channels through which the US benefits from R&D in developing countries.
To start, it has been well documented that R&D is characterized by large “knowledge spillovers,” wherein knowledge discovered by one R&D investment is useful to actors who did not perform the R&D.3 Scientific knowledge and technological inventions discovered in other countries can be adapted for US use. While the US will probably capture a smaller share of spillovers compared to domestic R&D, this may be offset by a higher social ROI.
Moreover, support for R&D in developing countries can also generate benefits not achievable by funding strictly domestic R&D. For example, HIV/AIDs and Covid-19 illustrate how diseases originating anywhere can become global pandemics. Yet local research capacity is often the first line of defense. Fry (2023),4 for example, shows that researchers in countries where Ebola outbreaks actually happen are much more likely to switch toward working on that topic (often in connection with foreign researchers), compared to similar scientists working in unaffected countries. More generally, several of the mechanisms deployed by the US to support developing country R&D facilitate the formation of international collaborations.5 This facilitates US researchers’ access to data and expertise not available domestically.6
Finally, we can think of support for developing country R&D as a form of humanitarian aid rather than purely as a form of R&D. Humanitarian aid can be justified with a variety of self-interested reasons (in addition to pure altruism which is itself a laudable objective). Global prosperity may reduce conflicts that affect US interests, or grow markets for US export. Aid is also a diplomatic tool for soft power and political influence. Indeed, this can be particularly true of international science, which tends to involve international collaboration.7 Finally, to the extent it promotes economic development, support for science can mitigate the need for altruistic humanitarian aid in the future.
The US Role in Developing Country R&D
Cuts to aid from the US will likely have a dramatic and negative impact on developing country R&D. The full extent of this support is difficult to quantify, due to the decentralized nature of funding and the diverse channels through which it is distributed across agencies and initiatives, but to get a sense of the scale of this funding that is at risk, we can look to the numerous US agencies that contribute to supporting science in developing countries. To begin, USAID allocated around $220 million to R&D in 2022, of which around 11 percent was likely directly granted to researchers in developing countries (based on the average rate of local funding at USAID reported in early 2025; this does not include funding provided to local researchers via grants to US institutions). Meanwhile, the Fogarty International Center (FIC) at the NIH, which supports global health research and capacity building, had a budget of approximately $95 million in 2023. It’s not clear how this compares to overall funding for research, but in 2022, US public funding for neglected disease research accounted for $1.918 billion, representing more than 76% of the world's investment in neglected disease research, though not all of this is performed in developing countries.
Recent US changes have already impacted global science investments. For instance, USAID funds 21 US-based Feed the Future Innovation Labs, which conduct research domestically while also partnering with universities in developing countries for fieldwork, training, and dissemination. This initiative supports the kind of agricultural research that we noted above has particularly high social returns (see Dalton and Fuglie 2022 for a discussion of the returns to this particular program). These initiatives were put on hold earlier this year, and its unclear how many of them have resumed operations. Another example of the impact of shifts in funding priorities include the termination of the USAID Strategic Partnerships for Enhancing Research and Knowledge (SPARK) program that began in 2024. SPARK, and its predecessor PEER, represented unique mechanisms for directly funding LMIC-based scientists, fostering local research careers, and addressing regionally relevant challenges. The reduction or delay in such initiatives signals potential challenges for sustaining scientific progress in these regions.
To close, there are some profound asymmetries in play here. While US support for R&D in developing countries is a large share of total developing country R&D, it actually represents only a tiny fraction of overall US science and development expenditures. USAID’s total budget in 2022 was $74 billion, meaning its R&D support accounted for less than 0.3% of total agency spending. Similarly, the Fogarty International Center’s $95 million budget constituted just 0.2% of the NIH’s total $47.7 billion appropriation in 2023.
Thanks for reading! As always, if you want to chat about this post or innovation in generally, let’s grab a virtual coffee. Send me an email at matt@newthingsunderthesun.com and we’ll put something in the calendar.
We discuss this paper a bit more in our post Training scientists in low and middle income countries
For comparison, Azoulay et al. (2019) find the average NIH grant over 1980-2005 was for $1.5mn and was acknowledged by 1.4 publications (over $1mn per publication).
Discussed more in our post Geography and what gets researched
We discuss some of these programs in our post Training scientists in low and middle income countries
See Gaule and Piacentini (2013), Hunt and Gauthier-Loiselle (2010), Flynn et al. (2024), Jia et al. (2023) for a discussion of some of the benefits of international collaboration and short-term visits to the US. The post An example of successful innovation by distributed teams: academia contains related discussion.
See Wagner (2002) for a discussion of the relationship between international scientific collaboration and foreign policy.