Do business and public sector research and development expenditures contribute to economic growth in Central and Eastern European Countries? A dynamic panel estimation

Abstract

This paper examines the impact of R&D expenditures in business and private sector on economic growth in Central and Eastern European Countries over the period 1998-2008. Using a Generalised Method of Moments estimator, we find that business R&D has a high and stable contribution to economic growth. Public R&D has no effect on growth but does not crowd out private activity. The paper also finds that part of the business R&D effect is accounted for by human capital. The results remain robust after considering macroeconomic control variables.

Does public R&D expenditure matter for economic growth?

“…In terms of a business R&D expenditure, the results are not in line with the findings of earlier empirical studies focused on impact of private expenditure and economic growth, such as Becker (2015), Garland and Allen (1995), Silaghi et al (2014) or Brautzsch et al (2015). The variety of findings is generated due to differences used in econometric models, country samples, observation periods and considered variables.…”

“…Correlation of the residuals and endogeneity problem is corrected by instrumenting dGDPit-1 with various dependent variable lags, different lag combinations were used to test robustness of results, and outcomes were mainly quite similar. Hence, the below models include a lag of one period and fixed effects as is usual in this type of studies (Perez-Sebastian, 2007;Silaghi et al, 2014). The software E-Views (9) is used for estimations.…”

“…Especially the less advanced EU regions, in which the public expenditure in R&D is higher, report the higher GDP growth rate. Silaghi et al (2014) empirically estimate the role of private and public R&D for growth of Central and Eastern European Countries during 1998-2008 and public R&D is found to be statistically insignificant. Brautzsch et al (2015) analyze the macroeconomic effects of R&D subsidies in the business cycle.…”

The Influence of R&D on Economic Development in the West African Sub-Region

“…These researches vary from different panels, time periods, variables and econometric methods. A study was conducted by Gumus and Celikay [17], comparing the economic growth rate between developed and developing countries per GDP expenditure on R&D, their findings were that in the long run the investment on R&D will be significantly and positively influencing the growth of the economy for all the augmented Solow growth model that includes in its specification the ratio of R&D to GDP and also human capital [21].…”

“…It explained a country's aggregate production function as a CobbDouglas type as in [21] [25]. In this model the concept of human capital was introduced which helped to establish a relationship between R&D expenditure, productivity and possibly other inputs, as in the case of [26].…”