Biagi F., Stančik J. (2015).
Characterizing the Evolution of the EU R&D Intensity Gap Using Data from Top R&D Performers. In F. Quatraro F, Crespi F., The Economics of Knowledge, Innovation and Systemic Technology Policy, Chapter 5, pp. 109-126.
While providing an exhaustive review of the relationship between R&D and productivity (at the micro, meso or macro level) is outside the scope of this work, we believe that there is sufficient evidence supporting the hypothesis that R&D activities matter for productivity and growth. This conclusion is important in the context of the US-EU productivity gap: if R&D is important for growth and given the existence of both a productivity and a R&D gap, closing the R&D gap is a precondition for closing the productivity gap4 (for a different perspective, see Havik et al., 2008). In order to account for differences in country size, the R&D gap is often presented in terms of R&D intensity gap (R&D over GDP). When comparing countries, focusing on the measured R&D intensity gap is especially interesting if one of the countries is at the technological frontier because it shows how far any other country is from the ‘optimal’ level of R&D, given its size (as measured by GDP). Hence, a positive US-EU gap means that, relative to its size, the EU is not spending enough in R&D, and this, given the positive relationship between R&D and productivity, implies that the EU is not improving its productivity at a satisfying rate. In fact, this is exactly the perspective that the EU Commission and the EU Council have taken, first in the Lisbon Agenda and later in the Europe 2020 strategy,5 when setting the 3 per cent target for (public and private) R&D spending as a percentage of GDP. Apart from the fact that setting a target based on the R&D/GDP ratio is debatable and risky6 (see Mathieu and van Pottelsberghe, 2008), the 3 per cent target for R&D intensity indicates that knowledge-led growth is among the main objectives of the EU. In this study, we present the evolution of the R&D intensity gap – and of its structural and intrinsic components – between the EU and its major competitors (US, Japan, BRIC, Asian Tigers), looking at four basic macro sectors defined in terms of their R&D intensity (as proposed by the OECD; see Hatzichronoglou, 1997). By decomposing the overall gap into a structural component (which reflects the role of differences in sectoral composition for a given average sectoral intensity) and an intrinsic component (which reflects the within-sector R&D intensity gap, for a given average sectoral composition), we can better understand the sources of the overall gap, at a given point in time or over a certain time horizon.