Some Tradeoffs of Competition in Grant Contests

Abstract: When funding public goods, resources are often allocated via mechanisms that resemble contests, especially in the case of research grants. A common critique of these contests is that they induce ``too much'' effort from participants. This need not be true if the effort in the contest is itself directed towards the public good. This papers analyzes survey data on scientists' time use and finds that scientists allocate their time in a way that is consistent with fundraising effort (e.g., grant writing) having inherent scientific value -- scientists who spend more time fundraising do not spent significantly less time on research even after conditioning on confounding factors. Theoretical models of contests are used to show that the presence of such a positive effort externality, where scientists generate social value when pursuing grants, changes the relationship between competition and the aggregate productivity of a grant contest. Ensuring that scientists exert socially valuable effort to obtain grants is increasingly important as grant contests become more competitive.