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Measuring the macroeconomic responses to public investment in innovation: evidence from OECD countries

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  • Giovanna Ciaffi
  • Matteo Deleidi
  • Mariana Mazzucato

Abstract

The paper aims to assess the macroeconomic impacts of government investment in Research and Development (R&D) and more generic fiscal policies by quantifying the Gross domestic product (GDP) and business R&D investment multipliers. Following the recent literature on fiscal policy, we combine the Local Projection approach with fiscal shocks estimated using Structural Vector Autoregressive modeling by focusing on a panel of 15 Organization for Economic Co-operation and Development (OECD) countries for the 1981–2017 period. Our findings support the idea that expansionary fiscal policies can positively and persistently affect the GDP level and crowd in business R&D investment. Additionally, our results show that public investment in R&D generates the largest multiplicative effect both on GDP and business R&D than the one associated with more generic public expenditures, even when fiscal expectations are considered.

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  • Giovanna Ciaffi & Matteo Deleidi & Mariana Mazzucato, 2024. "Measuring the macroeconomic responses to public investment in innovation: evidence from OECD countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(2), pages 363-382.
    • Handle: RePEc:oup:indcch:v:33:y:2024:i:2:p:363-382.
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    File URL: http://hdl.handle.net/10.1093/icc/dtae005
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