The article presents a dynamic model of research investment. This model allows us to examine three important channels through which public investment policy can affect the private sector's research investment, that is, the productivity, replacement, and wage effects. Two alternative empirical approaches are introduced to implement the model. Through a unified examination of the productivity, replacement, and wage effects, the empirical estimation of this model will provide insight into whether public-sector research investment crowds in or crowds out private-sector research investment.