R&D expenditure and economic growth: An empirical analysis

Abstract

Abstract Research and Development (R&D) has been of immense value in innovation, raising productivity and increasing economic growth. Nowadays, out of the various factors underlying economic growth, the most efficient are the R&D activities undertaken by the country, which can be most precisely measured by the R&D expenditure incurred by it. The present study is an effort to investigate the link of R&D expenditure with the per-capita Gross Domestic Product (GDP) by taking the data of 23 developing countries covering the period 1991–2010. To this end, after examining the trends and pattern of R&D expenditure in the economies, panel data regression tools such as fixed- and random-effects models have been applied. The respective coefficients of these models – i.e. 0.30 and 0.28 – imply a significant impact of R&D expenditure on economic growth. Further, the increasing coefficient of variation in the economic and technological activities gives the lie to the possibility of convergence across these economies over the period of time.