Japan's productivity and GDP growth: The role of GBAORD, public and foreign R&D

We analyse the dynamic interaction of Japan's total factor productivity (TFP), GDP, domestic and foreign private and public R&D as well as mission-oriented R&D, GBAORD, in a cointegrated VAR for Japan with data from 1988-2014. Analysis of effects of permanent shocks shows that (i) public R&D, unlike GBAORD, encourages private R&D and TFP, and has high internal rates of return. (ii) Japan's public and private R&D have a statistically significant positive effect on foreign private and public R&D stocks and vice versa. (iii) After transitory GDP shocks, public and private R&D are counter-cyclical and GBAORD is pro-cyclical in Japan.

Keywords: R&D, productivity, growth, spillovers, vector-auto-regression (VAR)

JEL Classification: F43, O19, O47, O53