Journal Article

Internal rates of return for public R&D from VECM estimates for 17 OECD Countries

Ziesemer, Thomas H.W.

2024

Overview

Public R&D stimulates domestic private and foreign private and public R&D, together enhancing technical change and thereby GDP. In this paper, we evaluate vector-error-correction model ( VECM) estimations and simulations of a companion paper in regard to internal rates of return (and related aspects) to additional public R&D of OECD countries and compare them to the macroeconomic literature. We show (i) internal rates of return to public R&D shocks, and (ii) the related payback periods, gain/GDP ratios, and sums of discounted (at 4%) gains. Fourteen of 17 countries show high internal rates of return, short payback periods, and high gains/GDP ratios from positive public R&D shocks if projects are stopped when gains get negative. Three countries show crowding-out effects and require (initial) reductions of public R&D before showing positive results.

• Publisher: Springer US,Springer Nature B.V
• Subject: Comparative studies / Crowding / Development Economics / Economic Growth / Economic Policy / Economics / Economics and Finance / Gains / GDP / Gross Domestic Product / Internal rate of return / International Economics / Macroeconomics / Macroeconomics/Monetary Economics//Financial Economics / Payback periods / Political Economy/Economic Systems / R&D / Research & development