Public R&D investment in economic crises

We study the cyclicality of public R&D in 29 OECD countries over the period 1995 to 2019. Public R&D is procyclical on average, and mostly driven by adjustments in public R&D aimed at the government and higher education sectors. However, public R&D reacts asymmetrically over differen...

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Bibliographic Details
Published in:Research policy 2024-12, Vol.53 (10), p.105084, Article 105084
Main Authors: Pellens, Maikel, Peters, Bettina, Hud, Martin, Rammer, Christian, Licht, Georg
Format: Article
Language:English
Subjects:
Business cycle
Public policy
R&D
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Summary:We study the cyclicality of public R&D in 29 OECD countries over the period 1995 to 2019. Public R&D is procyclical on average, and mostly driven by adjustments in public R&D aimed at the government and higher education sectors. However, public R&D reacts asymmetrically over different phases of the business cycle, becoming acyclical during recessions. This acyclicality masks an important heterogeneity across countries: the world’s leading innovators behave countercyclically during recessions and even increase public R&D. These results suggest that countries behind the innovation frontier could still strengthen their resilience to economic crises by adopting countercyclical public R&D strategies, thereby also safeguarding long-term growth through innovation. •We study the cyclicality of public R&D in 29 OECD countries.•We find that public R&D is, on average, procyclical.•Only leading innovators behave countercyclically and invest more in recessions.•Most countries can improve R&D policies by adopting countercyclical strategies.
ISSN:0048-7333
DOI:10.1016/j.respol.2024.105084