Evidence on an endogenous growth model with public R&D

Abstract

The empirical inves�ga�on of proper�es of an endogenous growth model by Huang, Lai, and Pereto (2023) in this paper confirms important assump�ons and results of the model for OECD countries. Labour-augmen�ng technical change is enhanced through private and public R&D stocks in FMOLS and DOLS mean-group es�ma�ons, and pooled mean-group (PMG) es�ma�on, also when adding the number of enterprises. The CES spillover func�ons in the growth models func�ons for R&D stock dynamics are supported through nonlinear es�ma�on under the assump�ons of iden�cal or different spillover parameters for private and public R&D. We suggest strong public-to-private spillovers and weak private-to-public spillovers as well as high elas�ci�es of subs�tu�on for private-public R&D stocks for private R&D processes and low CES for public R&D processes. We confirm the existence of private-public researcher interac�on effects in the private R&D knowledge growth func�on and provide tenta�ve evidence for the linear rela�on between public researchers and firm-level R&D and the hump-shaped rela�on between public and private researchers (both as % labour force). A vector-autoregressive (VAR) panel model in growth rates produces results, which are in accordance with the impact of public R&D cuts on the steady state and the transi�onal dynamics of the HLP model.