The economic impact of public R&D: an international perspective
Luc Soete, Bart Verspagen & Thomas Ziesemer
#2020-014
Despite the fact that Research and Development (R&D) activities are
carried out in most countries in public research institutes such as
universities and public research organisations, there have been few
studies that attempted to estimate the economic impact of such public
investment in R&D. In this paper we analyse the relations between total
factor productivity (TFP) and R&D as well as GDP for a set of 17 OECD
countries using a vector-error-correction model (VECM). We find that for
the period 1975-2014, investment in public R&D has had a clearly
positive effect on TFP growth in the majority of countries analysed. In
simulations allowing for a permanent positive shock on public R&D, we
observe a strong dynamic complementarity between the public and private
(domestic) stocks of R&D for a number of countries. In countries where
this complementarity is strong, the TFP effect of extra public R&D
investments is also strong. We also show that the share of foreign
funding of R&D performed in the business sector combined with a high
business R&D intensity, tends to be low in countries with high
complementarity between private and public R&D. On the other hand, the
share of basic R&D in business R&D combined with a higher public R&D
intensity, tends to be higher in countries with strong complementarity.
Keywords: R&D policy, public R&D investment, economic effects of R&D, vector-error-correction model
JEL Classification: O38, O30, H4