Do business and public sector research and development expenditures contribute to economic growth in Central and Eastern European Countries? A dynamic panel estimation

• Published in: Economic modelling Vol. 36; pp. 108 - 119
• Main Authors: Pop Silaghi, Monica Ioana, Alexa, Diana, Jude, Cristina, Litan, Cristian
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-01-2014; Elsevier Science Ltd
• Subjects: Central and Eastern European Countries; Dynamic models; Eastern Europe; Economic growth; Economic models; Economic theory; Estimation; Generalized method of moments; Generalized Methods of Moments estimator; Growth models; Human capital; R&D; Regression analysis; Research & development; Research & development expenditures; Research and development; Studies; Eastern Europe; Central Europe; Generalized Methods of Moments estimator; Human capital; Economic growth; Central and Eastern European Countries; O52; Research and development; O33; O32
• ISSN: 0264-9993; 1873-6122
• DOI: 10.1016/j.econmod.2013.08.035

This paper empirically estimates the role of private and public research and development in explaining growth of Central and Eastern European Countries (CEE) during 1998–2008. We employ a dynamic panel model using the Arellano–Bond's Generalized Methods of Moments (GMM). Our findings suggest that a 1% increase in business R&D intensity boosts economic growth by 0.050 (0.213) % in these countries in the short (long) run. Public R&D is found to be statistically insignificant. When introducing human capital in the regression, the contribution of business R&D to economic growth decreases, although it remains significant. We argue that part of its effect may be accounted for by human capital. While various robustness checks are performed (such as adding different control variables, sub-periods and dummies for the entrance years to the EU), most of the results imply significant business R&D coefficient. Some policy implications are addressed based on our results.
•We test the impact of R&D on economic growth in 10 CEE countries during 1998–2008.•We differentiate between public and private (business) R&D.•Business R&D has a strong and significant impact on growth.•Public R&D proves to have no effect on growth.•Results remain mainly the same when different robustness checks are applied.