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Strategic interactions in public R&D across EU-15 countries: A spatial econometric analysis

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  • Hakim Hammadou
  • Sonia Paty
  • Maria Savona

Abstract

The aim of this paper is to test the presence of strategic interactions in government spending on Research and Development (R&D) among EU-15 countries. We add to the literature on public choice strategic interactions in general, and to work on R&D spending in particular. We take account of traditional and some overlooked factors related to countries' public R&D spending, including (i) the international context -- i.e. Lisbon strategy; (ii) country characteristics - the National System of Innovation, and more specifically national similarities in relation to (a) trade and economic size and (b) sectoral specialization. Sectoral specialization is likely to affect government spending, depending on the mechanisms of complementarity or substitution between public and private R&D. Using a spatial dynamic panel model in which spatial matrices are specified both in terms of traditional Euclidean distance, and sectoral specialization proximity, we confirm the existence of strategic interactions on R&D spending among European countries with similar economic size, international trade and sectoral structure. Unlike the results emerging from the literature on strategic interactions in public choice, geographic proximity seems not to affect interactions related to public spending on R&D.

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Bibliographic Info

Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2012/14.

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Date of creation: 27 Aug 2012
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Handle: RePEc:ssa:lemwps:2012/14

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Keywords: Public spending strategic interactions; Public R&D expenditures; National Systems of Innovation; Complementarity public and private R&D; Spatial interactions; EU countries; spatial dynamic panel data;

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