Working Paper #2019-047
The impact of mission-oriented R&D on domestic and foreign private and public R&D, total factor productivity and GDP
We analyse 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 vector-error-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, 48.5% 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.
- Keywords
-
- Total factor productivity
- R&D
- growth
- cointegrating VAR
- permanent policy shocks
- JEL codes
-
- O11
- O38
- O47
- O52
Cite this as
APA 7th ed.Ziesemer, T. (2019). The impact of mission-oriented R&D on domestic and foreign private and public R&D, total factor productivity and GDP (UNU-MERIT Working Paper No. 2019-047). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=8381