The relationship between the rate of growth of gross domestic product and research and development in European Union countries
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Marigona Geci 
, Adriatik Hoxha
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
This research analyzes the relationship between the growth rate of output and the growth rate of aggregate expenditure on research and development (R&D) in the European Union (EU) and its member states. The aim is to evaluate how variations in R&D spending affect economic growth, particularly during economic downturns like the 2009 crisis. We use ordinary least squares (OLS) regression models, incorporating lagged variables to capture delayed effects and shift-dummy and impulse-dummy variables to assess the impact of structural changes. The analysis covers various model specifications with different lag structures and combinations of dummy variables. Rigorous diagnostic tests for heteroscedasticity, serial correlation, and non-normality ensure the robustness of our results. The findings indicate a statistically significant and robust positive relationship between economic growth and R&D expenditure growth. This relationship underscores the vital role of investment in R&D in stimulating economic growth. These insights are important for policymakers and stakeholders, providing evidence-based guidance on the strategic value of R&D expenditures in fostering sustainable economic development and shaping future innovation policies.
Keywords: Economic Growth, Output Growth, R&D, Economic Recession
Authors’ individual contribution: Conceptualization — M.G.; Methodology — M.G. and A.H.; Investigation — M.G. and A.H.; Resources — M.G. and A.H.; Writing — Original Draft — M.G. and A.H.; Writing — Review & Editing — M.G. and A.H.; Supervision — A.H.; Funding Acquisition — M.G.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: O30, O39, O40
Received: 02.05.2024
Accepted: 09.01.2025
Published online: 13.01.2025
How to cite this paper: Geci, M., & Hoxha, A. (2025). The relationship between the rate of growth of gross domestic product and research and development in European Union countries. Risk Governance and Control: Financial Markets & Institutions, 15(1), 61–74. https://doi.org/10.22495/rgcv15i1p6
