PublicationWorking paper

Ratio Working Paper 254: The Growth Effects of R&D Spending in the EU (A Meta-Analysis)

Abstract

In this paper we conduct a meta-analysis to examine the link between R&D spending and economic growth in the EU and other regions. The results suggest that the growth-enhancing effect of R&D in the EU15 countries does not differ from that in other countries in general, but it is less significant than that for other industrialized countries. A closer inspection of the data reveals that the weak results for the EU15 stem from comparisons with the US – the US has been able to generate a stronger growth response from its R&D spending. Possible explanations for the US advantage include higher private sector investment in R&D and stronger public-private sector linkages than in the EU. Hence, to reduce the “innovation gap” vis-à-vis the US, it may not be enough for the EU to raise the share of R&D expenditures in GDP: continuous improvements in the European innovation system will also be needed, with focus on areas like private sector R&D and public-private sector linkages.

In this paper we conduct a meta-analysis to examine the link between R&D spending and economic growth in the EU and other regions. The results suggest that the growth-enhancing effect of R&D in the EU15 countries does not differ from that in other countries in general, but it is less significant than that for other industrialized countries. A closer inspection of the data reveals that the weak results for the EU15 stem from comparisons with the US – the US has been able to generate a stronger growth response from its R&D spending. Possible explanations for the US advantage include higher private sector investment in R&D and stronger public-private sector linkages than in the EU. Hence, to reduce the “innovation gap” vis-à-vis the US, it may not be enough for the EU to raise the share of R&D expenditures in GDP: continuous improvements in the European innovation system will also be needed, with focus on areas like private sector R&D and public-private sector linkages.

Details

Author: Kokko, A, Gustavsson Tingvall, P, Videnord, J
Publication year: 2015

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