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Innovation Policy and Economic Growth

Author

Listed:
  • Dirk Czarnitzki
  • Otto Toivanen

Abstract

This paper establishes theoretically a link between investments in economic growth and investments in R and D. This raises the importance of innovation policies as they are designed to narrow the gap between the socially optimal and the privately optimal levels of R and D. As innovation policies may be subject to crowding-out effects, we, second, empirically test whether R and D subsidies stimulate private investment in two countries of the European economic area. We employ Belgian and German firm level data for estimating treatment effects models. It turns out that public R and D grants stimulate private investments in both countries. Furthermore, the estimated treatment effects vary with the innovation experience of firms and their past labor productivity.

Suggested Citation

  • Dirk Czarnitzki & Otto Toivanen, 2013. "Innovation Policy and Economic Growth," European Economy - Economic Papers 2008 - 2015 482, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0482
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    Cited by:

    1. A. Minniti & F. Venturini, 2014. "R&D Policy and Schumpeterian Growth: Theory and Evidence," Working Papers wp945, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Gyedu, Samuel & Heng, Tang & Ntarmah, Albert Henry & He, Yingqi & Frimppong, Emmanuel, 2021. "The impact of innovation on economic growth among G7 and BRICS countries: A GMM style panel vector autoregressive approach," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    3. Stefan Raychev & Blaga Madzhurova & Dobrinka Stoyanova, 2020. "Policies And Innovations To Promote Economic Growth And Employment In The Age Of Globalization," Proceedings of Economics and Finance Conferences 10912996, International Institute of Social and Economic Sciences.
    4. Janusz Myszczyszyn & Irena Lacka & Sylwia Golab & Beata Bedzik & Blazej Supron, 2021. "A Preliminary Analysis of the Relationship between Economic Growth and Selected Innovativeness Indicators on the Example of Four European Union Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 402-418.

    More about this item

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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