Does R&D Matter for Economic Growth or Vice-Versa? An application to Portugal and other European Countries
DOI:
https://doi.org/10.14738/abr.23.194Abstract
Significant research has studied the impact of Research and Development (R&D) on Gross Domestic Product (GDP) at the country level. However, few studies consider the possibility that a country’s GDP can also be a driver for R&D. This paper investigates the causal relationship linking R&D and growth in a sample of European Union (EU) countries, with an emphasis on Portugal. A causal relationship from growth to R&D can only be proven for France and Spain, whereas the inverse causality only seems to exist for The Netherlands. The co-integration results question the existence of a long-run relationship between R&D and GDP.
Keywords: R&D, Economic growth, Co-integration, Granger causality, European countries, Portugal.
References
Barbosa, N. and Faria, A.P. (2011) Innovation across Europe: How important are institutional differences? Research Policy, 40, 1157-1169.
Bravo-Ortega, C. and Marín, A.G. (2011) R&D and Productivity: A Two Way Avenue? World Development, 39, 1090–1107.
Cavalcanti, T. and Novo, A. (2005) Institutions and economic development: How strong is the relation? Empirical Economics, 30, 263–276.
Coada, A. and Rao, R. (2008) Firm growth and R&D expenditure. Economics of Innovation and New Technology 19, 127–145.
Dickey, D.A. and Fuller, W.A. (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49, 1057-1072.
Doornik, J.A. and Hansen, H. (2008) An Omnibus test for univariate and multivariate normality. Oxford Bulletin of Economics and Statistics 70, 927-939.
Ejermo, O., Kander, A. and Henning, M.S. (2011) The R&D-growth paradox arises in fast-growing sectors, Research Policy 40, 664-672.
Engle, R.F. and Granger, C.W.J. (1987) Co-integration and error correction: Representation, estimation and testing. Econometrica 55, 251-276.
Ertur, C. and Koch, W. (2011) A contribution to the theory and empirics of Schumpeterian growth with worldwide interactions. Journal of Economic Growth 16, 215-255.
Franses, P.H., and Haldrup, N. (1994) The effects of additive outliers on tests for unit roots and cointegration. Journal of Business and Economic Statistics 12, 471-478.
Granger, C.W.J. (1988) Some recent developments in a concept of causality. Journal of Econometrics 39, 199-211.
Johansen, S. (1991) Estimation and hypothesis testing of cointegration vectors in gaussian vector autoregressive models. Econometrica 59, 1551-1580.
Johansen S. and Juselius K. (1990) Maximum likelihood estimation and inference on co-integration with applications to the demand for money. Oxford Bulletin of Economics and Statistics 52, 169-210.
Jones, C. (1995) R&D based models of economic growth. Journal of Political Economy 103, 759-84.
Lucas R. (1988) On the mechanics of economic development. Journal of Monetary Economics 22, 3-42.
MacKinnon, J.G. (1996) Numerical distribution functions for unit root and co-integration tests. Journal of Applied Econometrics 11, 601-618.
MacKinnon, J.M., Haug, A. and Michelis, L. (1999) Numerical distribution functions of likelihood ratio tests for cointegration. Journal of Applied Econometrics 14, 563-777.
Romer, P. (1986) Increasing returns and long-run growth. Journal of Political Economy 94, 1002–1037.
Scopelliti, A.D. (2010) Competition and economic growth: A critical survey of the theoretical literature. Journal of Applied Economic Sciences 5, 70-93.
Tavares, J. (2004) Institutions and economic growth in Portugal: A quantitative exploration. Portuguese Economic Journal 3, 49–79.
Teixeira, A. (2007) How has the Portuguese innovation capability evolved? Estimating a time series of the stock of technological knowledge (1960–2001). Portuguese Journal of Social Science 6, 77-96.
Teixeira, A. and Fortuna, N. (2004) "Human capital, innovation capability and economic growth in Portugal, 1960 - 2001”. Portuguese Economic Journal 3, 205-225.
Teixeira, A., and Fortuna, N. (2010) Human capital, R&D, trade, and long-run productivity: Testing the technological absorption hypothesis for the Portuguese economy in 1960–2001. Research Policy 39, 335–50.
Wu, Y., Zhou, l., and Li, J. (2007) Co-integration and causality between R&D expenditure and economic growth in China: 1953-2004. International Conference on Public Administration, 869-76.