The Relationship between Research and Development (R D) Expenditures: Panel Cointegration Analysis Under Cross Sectional Dependency on OECD Countries

In this study, the effects of R D expenditures on economic growth in the sample of 21 OECD countries were analyzed with the help of production function by using the data between 1996 and 2011 period. Besides the R D expenditures, fixed capital formation and labour force growth variables were also utilized in the study. In the analysis, new generation panel data methods considering the cross sectional dependency, which assumes that a shock happening in one of the analyzed countries would affect the other one, was used. As a result of the analysis, it was determined that the increase in R D expenditures strongly affected the economic growth and this effect was higher than the fixed capital formation and labour force growth and 1 unit of increase in R D expenditures increased the economic growth 3.4 unit. It was found out that fixed capital formation and labour force growth variables also affected the economic growth positively and 1 unit of increase in these variables increased the economic growth 0.21 and 0.20 unit, respectively.