Relationship Between Private and Public Investment in R&D: A Dynamic Panel Data Analysis

This paper investigates the relationship between private and public investment in R&D, while taking into account the effect of several instruments policies such as subsidies and taxes. We design a new look of knowledge spillovers and R&D cooperation to explain the contribution of public and private R&D on growth. We propose a heterogeneous dynamic panel data model to consider the effect as well as endogenous. We also distinguish between the estimated long run and short run results. Our results based on a sample of 23 countries over the period 1992-2009 indicate that both public and private investment in R&D are complement. By establishing an endogenous growth model, the estimates indicate that public and private R&D depend on the host country’s human capital investment and that FDI is a more significant spillover channel than imports.