Does R&D, human capital and FDI matter for TFP in OECD countries?

Constantinos Tsamadias, Panagiotis Pegkas, Emmanuel Mamatzakis and Christos Staikouras

Economics of Innovation and New Technology, 2019, vol. 28, issue 4, 386-406

Abstract: This study investigates the interplay between research and development (R&D), human capital (HC), foreign direct investment (FDI) and total factor productivity (TFP) in OECD countries. We divide the sample into two sub-groups; the European and the non-European states so as to account for underlying country heterogeneity. The analysis follows a panel data approach over the period 1995–2015, taking into account the modelling on non-stationarity, long-run relationships and short-run dynamics with a panel VAR. Both R&D and HC have a positive effect on TFP, whilst FDI has a positive and significant effect only in the case of non-European countries. Moreover, the contribution of R&D is higher than that of HC and FDI in all cases. Thus, based on these findings, policymakers should design and implement policies to increase resources invested in R&D, with a consistent ongoing spending review, to attract foreign direct investment, especially for the majority of the European and some of the non-European countries and to improve education system on a more productive innovation and research base.

Date: 2019
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:ecinnt:v:28:y:2019:i:4:p:386-406

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DOI: 10.1080/10438599.2018.1502394

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