The role of R&D expenditure and human capital in shaping economic growth: A time series analysis of Hong Kong

Type of article: Research Article AbstractThis study investigates the causal relationship between research and development (R&D) financing and economic growth in Hong Kong over the period 1998–2022. It examines both public and private R&D expenditures, along with the number of researchers involved in R&D, to evaluate their influence on GDP per capita. Utilizing advanced time series econometric techniques, including the Toda-Yamamoto causality approach and cointegration analysis, the results reveal a statistically significant unidirectional causality from R&D expenditure to GDP per capita (χ² = 26.443, p < 0.01) and from researchers in R&D to GDP per capita (χ² = 38.164, p < 0.01). Additionally, feedback effects were observed, with GDP per capita also causing R&D expenditure (χ² = 17.471, p < 0.01), and R&D expenditure influencing the number of researchers (χ² = 6.718, p < 0.01). These findings highlight the dynamic interplay between financial inputs and human capital in R&D and underscore the importance of sustained investment and a skilled research workforce in fostering long-term economic growth. The evidence supports the strategic role of R&D policy in enhancing productivity and promoting economic sustainability in knowledge-based economies.