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Can large-scale RDI funding stimulate post-crisis recovery growth? Evidence for Finland during COVID-19

Timo Mitze and Teemu Makkonen

Technological Forecasting and Social Change, 2023, vol. 186, issue PB

Abstract: The COVID-19 pandemic and subsequent public health restrictions led to a significant slump in economic activities around the globe. This slump has been met by various policy actions to cushion the detrimental socio-economic consequences of the COVID-19 crisis and eventually bring the economy back on track. We provide an ex-ante evaluation of the effectiveness of a massive expansion of RDI funding in Finland to stimulate post-crisis recovery growth through an increase in RDI activities of Finnish firms. We make use of the fact that novel RDI grants for firms in disruptive circumstances granted in 2020 were allocated through established RDI policy channels. This allows us to estimate the structural link between RDI funding and economic growth for Finnish NUTS-3 regions based on pre-COVID-19 data. Estimates are then used to predict regional recovery growth out of sample and to quantify the growth contribution of RDI funding. Depending on the chosen scenario, our out-of-sample predictions point to a mean recovery growth rate of GDP between ~2–4 % in 2021 after a decline of up to −2.5 % in 2020. RDI funding constitutes a significant pillar of the recovery process with mean contributions in terms of GDP growth of between 0.4 and 1 %-points.

Keywords: GDP forecasts; Regional growth; RDI funding; Post-crisis recovery; COVID-19; Finland (search for similar items in EconPapers)
JEL-codes: C23 C53 H50 O38 R12 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Can large-scale R&I funding stimulate post-crisis recovery growth? Evidence for Finland during COVID-19 (2021) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:186:y:2023:i:pb:s0040162522005947

DOI: 10.1016/j.techfore.2022.122073

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