Comparative Analysis of Research and Development Productivity among European Countries

In 2024, the Korean government drastically reduced its budget by emphasizing financial soundness and efficiency of R&D investment. Meanwhile, this discussion is in line with the R&D Paradox discussed in Europe around the 2000s. Accordingly, this paper surveyed G10 European countries, Germany, the UK, France, Belgium, the Netherlands, and Italy, which have joined the OECD for the past 50 years (1970-2020), for the total amount of R&D investment, total factor productivity, which is a proxy for science and technology development, and economic growth variables were estimated based on the permanent inventory method and growth accounting, respectively. The causal relationship between these variables was empirically analyzed based on the Cobb-Douglas production function. As a result of the analysis, the R&D stock of six European countries had a positive effect on both science and technology development and economic growth, and it was found to be statistically significant. However, the causal relationship between R&D stock and TFP was estimated somewhat differently by country, and the efficiency of R&D investment was higher in Germany, France, and Belgium than in the UK, the Netherlands, and Italy. In particular, major European countries were showing a decreasing trend of total factor productivity, which is a proxy for science and technology development. In addition, companies' R&D investment efficiency is gradually higher than that of the government. This suggests that it is necessary to improve the efficiency of R&D investment by revitalizing joint R&D and open innovation between the government and companies.