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Public investment in R&D in reaction to economic crises - a longitudinal study for OECD countries


Pellens, Maikel ; Peters, Bettina ; Hud, Martin ; Rammer, Christian ; Licht, Georg


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URL: https://madoc.bib.uni-mannheim.de/44603
URN: urn:nbn:de:bsz:180-madoc-446032
Document Type: Working paper
Year of publication: 2018
The title of a journal, publication series: ZEW Discussion Papers
Volume: 18-005
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H54 , H12 , H61,
Keywords (English): Public R&D expenditure , economic crisis , OECD , panel data
Abstract: The paper investigates the reaction of public R&D spending on economic crises. We are interested in two counteracting motives: On the one hand, public R&D spending can be seen as a means to fight the crisis, and governments may decide to increase their R&D budgets. On the other hand, a crisis reduces public income and urges governments to cut spending, which may negatively affect public R&D budgets. Using panel data from 26 OECD countries over the period 1995 to 2015, we investigate how public R&D expenditure changes over the business cycle for different types of government R&D expenditure. On average, we find evidence for a strong pro-cyclical effect on public R&D investments. But country heterogeneity matters. Whereas European innovation leaders and non-EU countries pursue a counter-cyclical strategy, innovation followers and moderate innovators behave pro-cyclical. This leads to an increasing innovation gap in Europe. Short-run and long-run financing conditions (budget surplus and government debt levels) also significantly affect public R&D spending. However, there is no evidence that economic crises systematically affect the composition of public R&D spending along different thematic areas or by beneficiaries.

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