Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5055397 | Economic Modelling | 2011 | 5 Pages |
We examine the effect of research and development (R&D) on long-term economic growth using the Bayesian model averaging (BMA) to deal rigorously with model uncertainty. Previous empirical studies, which applied BMA, investigated the effect of dozens of regressors on long-term growth, but they did not examine the effect of R&D due to data unavailability. We extend these studies by proposing to capture the investment in R&D by the number of Nobel prizes in science. Using our indicator, the estimates show that R&D exerts a positive effect on long-term growth. This result is robust to many different parameter and model prior structures as well as to alternative definitions of R&D indicator.
⺠Research & development exerts a positive effect on long-term economic growth. ⺠The investment in research & development is proxied by the number of Nobel prizes. ⺠Bayesian model averaging analysis used to address model uncertainty.