Do Spending on R&D Influence Income? An Enquiry on the World’s Leading Economies and Groups

Abstract

The study examines the interplays between R&D-GDP ratio and levels, and growth of per capita GDP of top ten countries in R&D expenditure and economies of different groups in both long and short runs during 1996–2017. The results show that R&D expenditure and per capita GDP growth rates have long-run associations for high-income and upper-middle-income groups along with Japan, Germany, South Korea, France, UK, India, and Brazil, and errors are corrected for all. Further, per capita GDP growth is the cause of R&D for OECD, upper-middle-, and low- and middle-income groups along with Japan, and R&D is the cause to per capita GDP for India, Russia, and Brazil. Finally, there is bilateral causality between the two for USA, China, and South Korea. Interestingly, there are no true long-run associations between R&D and per capita GDP, although some short-run interplays are there. Hence, the study prescribes that excessive spending in R&D at the cost of other sectors needs to be reviewed.