Mission-oriented R&D and growth of Japan 1988-2016: a comparison with private and public R&D

We analyze the dynamic interaction of Japan's total factor productivity (TFP), GDP, stocks of domestic and foreign private and public as well as mission-oriented R&D, called GBARD in OECD statistics, in a vector-error-correction model (VECM) for Japan with stock data for the period 1987-2016. Permanent policy changes show the following main results: (i) GBARD as well as private and public R&D each encourage growth rates of the other R&D stocks and of TFP and GDP, and (ii) all have high internal rates of return; (iii) Japan's R&D policies affect and are affected by foreign R & D; in particular, Japan's public R&D has a positive impact on European private R&D, whereas other OECD countries' R&D has a negative one. Japan's R&D policies should be supported by education policies enhancing especially the number of PhDs and IT personnel.

Automated summary

This study uses stock data for Japan from 1987 to 2016 to analyze the dynamic interaction of Japan's total factor productivity (TFP), stocks of domestic and foreign private and public R&D, and mission-oriented R&D (GBARD) in GDP growth. The results show that GBARD and private and public R&D all encourage the growth of other R&D stocks, TFP, and GDP, and they have high internal rates of return. Japan's R&D policies are affected by and affect foreign R&D, with Japan's public R&D having a positive impact on European private R&D, while other OECD countries' R&D has a negative impact. Therefore, Japan's R&D policies should be supported by education policies that enhance the number of PhDs and IT personnel.