Public R&D and Growth: A dynamic Panel Vector-Error-Correction Model Analysis for 14 OECD Countries

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Abstract

This paper addresses the controversial issue of the direct and indirect effects of public R&D on growth. We look at six variables of R&D-driven growth jointly for 14 OECD countries using methods of dynamic systems for panel data analysis: GDP, technical change, domestic and foreign businesses and public R&D. Cointegration tests suggest four long-run relations for the six variables. We estimate these relations using group mean versions of fully modified and dynamic OLS. Domestic public R&D has positive long-run regression coefficients for direct effects on productivity and indirect ones via private R&D. Here, we build a panel vector-error-correction model with these long-term relations. Shocks to domestic public R&D enhance domestic private R&D, technical change and the GDP. Permanent changes in foreign public and private R&D have positive growth effects, which are transitional for foreign public R&D.
Original languageEnglish
Article number216
Number of pages33
JournalEconomies
Volume12
Issue number8
DOIs
Publication statusPublished - 22 Aug 2024

JEL classifications

  • o19 - "International Linkages to Development; Role of International Organizations"
  • o47 - "Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence"
  • o50 - Economywide Country Studies: General

Keywords

  • growth;
  • R&D;
  • productivity;
  • OECD;
  • panel cointegration;
  • panel VECM;
  • impulse response

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