Political Economy of R&D to Support the Modern Competitiveness of Nations and Determinants of Economic Optimization and Inertia

Abstract

The study here analyzes the association between R&D expenditure (as % of GDP) and labor productivity across leading geo-economic players. Empirical evidence seems to show, during the period of analysis, a strong positive association between public and private R&D expenditure. In addition, when R&D spending of business enterprise sector exceeds R&D spending of government sector, the labor productivity tends to growth (economic optimization), ceteris paribus. In general, effects of friction (inertia) on labor productivity growth are displayed by countries whose R&D intensity is driven mainly by R&D expenditure of government sector. Results provide fruitful implications that can support a rational political economy of R&D in order to foster the competitiveness of countries in fast-changing and turbulent markets.

Keywords: R&D, Political Economy, Competitiveness

JEL Classification: L30, O30