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Effects of Public and Private R&D on Private-Sector Performance in the United States

College of William and Mary

Alfredo M. Pereira

College of William and Mary

This study analyzes the effects of public and private research and development (R&D) on private-sector output, employment, and investment using a multivariate time-series approach. This approach follows the conceptual argument that dynamic feedbacks are essential to understanding the relationship between public-funded R&D and private-sector performance. With this approach, the authors are able to measure the total effects of public and private R&D on private output. The results suggest that in the long term, public R&D does not affect employment but crowds in private investment, whereas private R&D is a substitute for both. As a consequence, the long-term effects of public R&D on output are positive and substantial, whereas the effects of private R&D are at best marginally positive. As a corollary, the authors argue that public R&D should be brought into the limelight as a leading candidate for explaining the growth slowdown in the past decades.

Key Words: Private R&D • public R&D • economic performance

Public Finance Review, Vol. 31, No. 4, 429-451 (2003)
DOI: 10.1177/1091142103031004005


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