The impact of mission-oriented R&D on domestic and foreign private and public R&D, total factor productivity and GDP

Research output: Working paper / PreprintWorking paper


We analyze the dynamic interaction of mission-oriented R&D expenditure stocks with domestic and foreign private and public R&D, total-factor-productivity (TFP) and gross domestic product (GDP) for seven EU countries, for which we have sufficiently long time-series of mission-oriented R&D data. We use the vectorerror-correction (VECM) method. Permanent shocks on mission-oriented R&D increase total-factor-productivity and GDP, mostly because for the UK private R&D is increased or, for Belgium and Italy, public R&D is increased or, for Denmark, France, Germany and the Netherlands, both are increased. France has an initial phase where mission-oriented R&D has to be reduced first and expanded later to get good policy results. On average across periods and countries, a 1 percent increase of mission-oriented R&D leads to an additional 0.485% public R&D, 0.705% private R&D, 0.485% for TFP, and 0.56% GDP. We also show years of positive gains, the sums of discounted net present values, and the average yearly gains/GDP ratio. Mission-oriented R&D has high internal rates of return calculated from comparison of baseline and shock scenario comparison using VECM simulations until 2040. Heterogeneity limits the possibility to find a common model of long-term relations. For most countries we find that in steady states mission R&D reacts to foreign and domestic public R&D and increases TFP. TFP, foreign public and domestic private R&D have two-way causality relations.
Original languageEnglish
Place of PublicationMaastricht
Publication statusPublished - 2019

Publication series

SeriesUNU-MERIT Working Papers

JEL classifications

  • o11 - Macroeconomic Analyses of Economic Development
  • o38 - Technological Change: Government Policy
  • o47 - "Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence"
  • o52 - Economywide Country Studies: Europe


  • total factor productivity
  • R&D growth
  • cointegrating VAR
  • permanent policy shocks

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