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

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  • Thomas H. W. Ziesemer

    (Department of Economics and UNU-MERIT, Maastricht University, 6211AX Maastricht, The Netherlands)

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.

Suggested Citation

  • Thomas H. W. Ziesemer, 2024. "Public R&D and Growth: A Dynamic Panel Vector-Error-Correction Model Analysis for 14 OECD Countries," Economies, MDPI, vol. 12(8), pages 1-33, August.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:8:p:216-:d:1461688
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