Econometric modelling support links research and innovation to jobs and growth
RAND Europe researchers assessed research and innovation reforms in EU countries to improve the modelling of policy impacts within the European Commission's QUEST III macroeconomic model.
Among other things, they found that private firms that collaborate with universities or other public research organisations tend to innovate more, and that R&D tax incentives tend to increase R&D expenditure and innovation.
The European Commission’s macroeconomic model, known as QUEST, is used for policy analysis and research and has contributed to the shaping of research and innovation policymaking. Despite its sophistication, it was not designed to evaluate research and innovation reforms, particularly policies that aim to enhance the diffusion of technologies or the impact of public R&D on knowledge creation.
In light of this, the Commission wished to enrich the QUEST III model to better understand the link between research and innovation, employment and growth. The Directorate-General for Research and Innovation (RG R&I) and Directorate General for Economic and Financial Affairs (DG ECFIN) thus commissioned a research project, led by Deloitte LLC, in which RAND Europe contributed to an assessment of research and innovation reforms in EU countries to improve the modelling of policy impacts within QUEST III.
RAND Europe used a combination of desk-based research, impact assessment of existing research and innovation reforms, and econometric modelling to support the research project and help to calibrate QUEST III. During the project, we also worked with two external experts, economists Prof Diego Comin of Dartmouth College and Dr Alessandro Rosiello from the University of Edinburgh.
Performance-based funding. Literature evaluating the impact of performance-based funding on research productivity is relatively scarce and shows mixed results. While some studies document a significant increase in the quantity of university research following the adoption of performance-based funding, other studies fail to identify statistically significant effects.
R&D specialisation. R&D specialisation policies seek to encourage investment in either specific geographical areas, and/or technology fields. Available literature primarily focuses on the evaluation of cluster policies and their collective effects. It also suggests that R&D productivity increases in relation to how close it is to a technology cluster.
Public-private R&D cooperation. While there is a lack of evidence on the effectiveness of policies seeking to encourage public-private R&D cooperation, several studies do consider the impact of cooperation on private R&D productivity. These suggest that firms that collaborate with universities or other public research organisations tend to innovate more.
Research commercialisation. The available literature primarily focuses on the evaluation of Technology Transfer Offices (TTOs), and suggests that research commercialisation drawn from university income from patents and licences is associated with the presence, size, and characteristics of TTOs.
R&D tax incentives. R&D tax incentives such as reduced corporate tax have been found to increase R&D expenditure and innovation. The elasticity of R&D expenditure with respect to tax credits suggests that tax credits considerably stimulate R&D investment without significantly reducing tax revenues.