The Effect of Public and Business R&D Capital on Productivity: Evidence from five regional countries of the Eurozone.
Abstract
This study empirically investigates the impact of public and business capital on research and development (R&D) on Total Factor Productivity (TFP) in a group of five Eurozone countries during the period 1995-2015. Panel data analysis shows that there is a cointegration relationship between TFP and public and business capital in R&D. The results of the empirical analysis show that, in the long run, public and business capital in R&D had a positive and statistically significant impact on TFP. The impact of public R&D capital was higher, compared to the impact of business R&D capital. Also, the results show that there is a bidirectional long-run Granger causality relationship between the examined variables. In conclusion, the results verify the theory, support policies to promote public and especially business R&D for the five peripheral countries of the Eurozone.
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