R&D in WorldScan. Paul Veenendaal

Transcription

1 R&D in WorldScan Paul Veenendaal

2 Outline WorldScan characteristics How is R&D modelled? Spillover estimates and their implications Extension: R&D workers are difficult to attract Lisbon agenda targets what are the benefits of subsidizing R&D? R&D in WorldScan

3 WorldScan General equilibrium (micro foundations) Interaction: markets, countries and sectors (GTAP-8 classifications) Recursively dynamic model Econometrically underpinned consumer demand, savings, capital mobility, R&D spill-overs Many toggle-wise extensions (variations on a core version) climate change and clean air policies monopolistic competition foreign direct investments R&D sector and endogenous R&D decisions Human capital development 3 R&D in WorldScan

4 R&D modelling in WorldScan R&D expenditures accumulate in R&D stocks Firms decide on optimal R&D stock R&D stock accumulations are produced in a separate R&D sector which requires R&D workers R&D spills over to total factor productivity via own sector other sectors foreign sectors R&D intensity falls over time in EU baseline growth of services economy relative strong growth of R&D-extensive new member states 4 R&D in WorldScan

5 R&D in CES production nest 5 R&D in WorldScan

6 R&D modelling equations 6 R&D in WorldScan

7 R&D spillover estimates Coefficient Parameter estimate Average elasticity Own sector R&D spillover (0.022) Other sectoral R&D spillover (0.107) Foreign R&D spillover (0.233) Total N=2250; R 2 = 0.183; Lejour, A.J. and R. Nahuis (2005), R&D spillovers and growth: specialisation matters, Review of International Economics, R&D in WorldScan

8 Very high social rate of return 90% gross internal rate of return; this is at the high end of the spectrum Estimates from macro-data typically are in the range of % Estimates from micro-data typically are lower and in the range of 20-40% (they capture less spillovers) Thus: as the social rate of return exceeds the private rate of return government interventions that promote R&D may improve economic welfare 8 R&D in WorldScan

9 Implementation of the spillover estimates in WS Originally, the coefficient for spillovers within the own domestic industry was set to zero to prevent double counting (with the contribution to production of the own R&D capital stock) Later on it was shown that double-counting fears were in part unwarranted and a coefficient value of intrasectoral spillovers of was introduced Visser, S., R&D in WorldScan, CPB Memorandum 189, R&D in WorldScan

10 Modification of production nest for value added (1) 10 R&D in WorldScan

11 Modification of production nest for value added (2) 11 R&D in WorldScan

12 .. and introduction of wage differential between highskilled and R&D workers Hence, the impact of heavy subsidies on R&D will partly evaporate into wage increases for R&D workers Rojas-Romagosa, H., Modelling Human Capital formation in WorldScan, CPB Memorandum 244, R&D in WorldScan

13 Objective five Lisbon highlights Economic effects of reaching Lisbon targets on economic growth sectoral structure Five targets employment, R&D, human capital, administrative burden, services directive What-if: targets reached by assumption! no assessment of realism costs of policy only partly included Uncertainty R&D: lower and upper bound for social returns to R&D See: Gelauff, G.M.M. and A.M. Lejour, Five Lisbon highlights; the economic impact of reaching these targets, CPB document 104, R&D in WorldScan

14 R&D expenditures in 2003, selected countries (% GDP) 14 R&D in WorldScan

15 Five Lisbon highlights: R&D simulations Target: EU expenditure at 3% GDP in increase in R&D stock proportional to GDP until after 2020: falling R&D (services economy) - at country level an upper limit of 4.5% is imposed Spillovers in two scenarios - lower bound: social return to R&D 30% - upper bound: social return to R&D 90% Instrument: subsidy on user costs of R&D 3% expenditure target met over at EU-level 15 R&D in WorldScan

16 Five Lisbon highlights: two R&D scenarios, 2025 (% difference to baseline) low (30%) high (90%) R&D stock country range: 0-300% GDP productivity impacts Consumption Exports R&D sectors produce tradeables Real wages R&D in WorldScan

17 Effects of five Lisbon targets, EU, lower bound, 2025 (%) 17 R&D in WorldScan

18 Conclusions WorldScan R&D modelling A highly stylized reflection of R&D practice Showing the role of R&D as a growth promoter Based upon empirical foundations (spillover estimates, elasticities value added nest, wage elasticity of R&D workers) Five Lisbon highlights showed - What would have happened if a miracle would have occurred GDP increase: % Consumption increase: 9-19% R&D ranks second as a vehicle for growth -... but miracles do not exist targets were very ambitious potential role of policy instruments remains rather uncertain 18 R&D in WorldScan