Research and development expenditures and economic growth: a country panel study

Abstract

Endogenous economic growth literature considers economic development as a consequence of technological progress, which happens due to the implementation of scientific researches, the search for new ideas and the emergence of innovations. Such models assume that these technological advances are significant when they result from decisions of economic agents (from both the public and private sectors). That is, when there is the intention of performing research and development (R&D) and, therefore, it is decided to invest in technological progress. Basing on these ideas, the goal of this project is to verify if countries that spend more financial resources with R&D present higher rates of economic growth. For this purpose, we will analyze empirically the relation between expenditure with R&D, technological innovation and its impact on long-term economic growth. The literature review will provide the most appropriate way of dealing with the problem of endogeneity between R&D expenditure and economic growth. As a first step to control for it, we will use dynamic models as Arellano-Bond estimates, and employ two steps estimations, namely: expenditure engendering innovation and innovation engendering knowledge. We will use annual data from countries between 1960 and 2017 from the World Bank and other international sources to estimate regression models.