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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
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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
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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
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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
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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
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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
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