Evidence on an endogenous growth model with public R&D

Thomas Ziesemer


The empirical investigation of properties of an endogenous growth model by Huang, Lai, and Peretto (2023) in this paper confirms important assumptions and results of the model for OECD countries. Labour-augmenting technical change is enhanced through private and public R&D stocks in FMOLS and DOLS mean-group estimations, and pooled mean-group (PMG) estimation, also when adding the number of enterprises. The CES spillover functions in the growth models functions for R&D stock dynamics are supported through nonlinear estimation under the assumptions of identical or different spillover parameters for private and public R&D. We suggest strong public-to-private spillovers and weak private-to-public spillovers as well as high elasticities of substitution for private-public R&D stocks for private R&D processes and low CES for public R&D processes. We confirm the existence of private-public researcher interaction effects in the private R&D knowledge growth function and provide tentative evidence for the linear relation between public researchers and firm-level R&D and the hump-shaped relation between public and private researchers (both as % labour force). A vector-autoregressive (VAR) panel model in growth rates produces results, which are in accordance with the impact of public R&D cuts on the steady state and the transitional dynamics of the HLP model.

Keywords: Endogenous growth, public R&D, evidence

JEL Classification: O41, O38, O47

Download the working paper