An empirical analysis of the impact of R&D on productivity in EU countries

Abstract

The research investigates the question whether research and development expenditures contribute to productivity growth and depend on the particular countries’ capacity and industries’ technological level. The paper deals with the analysis of the impact of R&D on the companies’ productivity on the industry level in EU countries based on panel data and the stochastic frontier production function approach. We estimate the production function separately for six different sectors and one industry. The results indicate that distribution of production and other relevant factors, such as physical capital per employee, labour force with tertiary education, ICT goods exports etc., vary significantly across industries, reflecting different absorption and diffusion capability of economies and their potential to structural changes. The findings have the practical value for strategic development of Ukrainian economy in the course of integration into EU market, and suggest the design of R&D policy based on the experience of EU countries, structure of the national industries, their technological level and future perspectives