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R&D: changing patterns and implications for growth Sid Shanks Goals of the project Investigate changes in the nature and industry mix of R&D Investigate the drivers of R&D effort Investigate the influence of R&D on industry and national productivity growth 2 02-03 00-01 98-99 96-97 94-95 92-93 90-91 84-85 85-86 86-87 87-88 88-89 10000 81-82 78-79 76-77 GERD $m (2002-03 prices) 14000 R&D intensity 8000 1.0 6000 Real GERD 4000 0.5 0 GERD/GDP in per cent The long run increase in Australian R&D activity 2.0 12000 1.5 2000 0.0 3 Average annual growth in GERD and institutional contributions % point 8.0 Private Non-profit 6.0 Higher Edu. 4.0 Government 2.0 Business 0.0 76-77 to 84-85 84-85 to 96-97 76-77 to 02-03 4 Business expenditure is the main driver $ 7000 m per cent of GDP Real expenditure 6000 BERD / GDP 1.0 0.8 5000 4000 0.5 3000 2000 0.3 1000 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 88-89 86-87 84-85 81-82 78-79 76-77 0.0 73-74 0 5 High growth period: mid-80s to mid-90s Growth Rate of BERD (Percentage change in R&D stock depreciated at 10%) 0.12 High growth period 0.10 Decline in stocks: R&D investment insufficient to offset 10% depreciation rate 0.06 0.04 0.02 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 -0.02 1971 0.00 1969 per cent 0.08 6 GERD is more ‘market oriented’ $m 6000 Pure Basic Strategic Basic Applied 4000 Experimental Development 2000 0 02-03 84-85 Business 84-85 02-03 Government 02-03 84-85 Higher Ed 7 Services R&D now rivals manufacturing $m 3000 Mining 2500 Manufacturing 2000 Service Industries 1500 1000 500 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 88-89 86-87 84-85 81-82 78-79 76-77 73-74 0 8 Implications for measuring the effect of R&D on productivity? Significant differences in rates of growth, and differences by time periods across industries: variance in the relationship between R&D & productivity Impact of changing industry shares in BERD on productivity Impact of greater ‘market’ orientation of R&D on productivity More “D” than “R” Changing relationships over time Indirect linkages – spillovers and role of domestic R&D in absorption The ‘two faces’ of R&D 9 Work-in-progress results Basic model – Some encouraging results … but Problems with robustness of estimates and getting results on some variables of interest (particularly, ‘external’ R&D and spillovers) Estimation challenges (for example, trending series) Have only looked at market sector and manufacturing to date Implications ‘Wide band’ on estimates of rates of return to R&D at this stage Many extensions and issues yet to be investigated: some way to go in getting a “benchmark” set of results 10 Key points Long run increase in GERD Driven mostly by business, but also increasing Higher Education R&D Growth in service industries particularly strong Growth in BERD strongest in the reform period Increased market orientation in all sectors 11