A macroeconomic analysis of the returns to public R&D investments

This paper analyses the economic returns to public R&D investments in 22 OECD countries. We exploit a dataset containing time series from 1963 to 2011 and estimate and compare the outcomes of different types of production function models. Robustness analyses are performed to test the sensitivity of the outcomes for particular model specifications, sample selections, assumptions with respect to the construction of R&D stocks, and variable definitions. Analyses based on Cobb-Douglas and translog production functions mostly yield statistically insignificant or negative returns. In these models we control for private and foreign R&D investments and the primary production factors. Models including additional controls, such as public capital, the stock of inward and outward foreign direct investment, and the shares of high-tech imports and exports, yield more positive returns. Our findings suggest that public R&D investments do not automatically foster GDP and TFP growth. The economic return to scientific research seems to depend on the specific national context.