R&D expenditures in the high-tech sector and economic growth across 30 OECD countries, a panel data analysis

Abstract

The present thesis examines the impact of research and development spending regarding the high-tech sector on short- and long-term economic growth. Specifically, this research provides new evidence utilizing a semiparametric empirical growth model (system GMM estimator) using panel data regarding 30 OECD countries from 1970 to 2019. It also constitutes an attempt to further enhance the findings presented in Falk (2007). Initially, this is sought by re-estimating the model utilized by Falk (2007) following the same methodology for the period from 1970 to 2004. Then, we estimate the growth equation utilizing an expanded panel dataset regarding the period from 1970 to 2019. The third subsection of the estimations concerns the addition of an alternative measure of innovation introduced by LeBel (2008). This study constitutes a continuation of the branch of research which investigates whether the composition of R&D activities (shifting from low- to high-tech areas) has an additional impact on economic growth. The estimations are carried out utilizing a two-step system GMM estimator which contributes to the minimization of endogeneity. The results indicate that the share of business R&D expenditures oriented to high-tech areas has indeed a positive effect on GDP per working-age population, GDP per hour worked, and GDP per employed person regarding the short-term horizon in both datasets (1970 to 2004 and 1970 to 2019). Regarding the long-term horizon, the R&D composition’s impact is not consistent. Economic growth is positively and intertemporally affected by the population’s education level, the ratio of business R&D to GDP, and the level of investment to GDP ratio. Finally, Innovindex proposed by LeBel (2008) is found to be statistically non-significant as an alternative measure of innovation (estimates from 1995 to 2019).