The Impact of Expenditures on Research and Development

This study seeks to investigate the relationship between research and development expenditures and the performance of the sector in Canada, Quebec, and Saskatchewan, applying the Pooled Mean Group Estimator in the context of a Panel Autoregressive Distributed Lag (PARDL) model. The series are non-stationary with data consistently drifting upwards and downwards without reverting to a stable mean. ARDL (1,1,1,1,1,1) model with linear trend specification turn out to be the best. The model shows mutual, single-direction, and unrelated connections between some indicators. In the following year, disequilibria in total research and development expenditure relative to the long-run steady state are adjusted by 35.37% for Canada, 33.55% for Quebec, and 104.5% for Saskatchewan, underscoring Saskatchewan’s comparatively accelerated convergence to equilibrium. The estimated joint speed of adjustment to the long-run equilibrium is –0.577929, signifying that approximately 57.79% of the disequilibrium in total research and development expenditure is corrected within the subsequent year. Over time, a 1% adjustment in research and development spending by the business enterprise sector, federal government sector, higher education sector, provincial government sector, and provincial research organization sector is expected to raise total research and development expenditure by about 99.53%, 100.31%, 100.99%, 91.51%, and 110.24%, respectively. Moreover, the expenditure on research and development by provincial research organizations sector, higher education sector, and federal government sector has been superior. Convincingly, the pairwise Granger causality tests revealed that the provincial government sector’s expenditure on research and development have a more substantial effect on total expenditure on research and development, the expenditure on research and development by business enterprise sector, and the expenditure on research and development by federal government sectors’ fluctuation for the sub-region. Conversely, research and development expenditure by the higher education sector exerts a stronger influence on fluctuations in the federal government sector’s expenditure within the sub-region.