Working Paper Cnr-Ceris, N° 06/2012

What are the effects of public debt on innovation and employment growth?

Coccia Mario

CNR - National Research Council of Italy

& GEORGIA INSTITUTE OF TECHNOLOGY

Current Address:

School of Public Policy

at Georgia Institute of Technology

685 Cherry Street, N.W. - Suite 217

Atlanta, Georgia 30332-0345

Permanent Address:

CERIS- CNR via Real Collegio, n. 30

10024 Moncalieri (Torino) – Italy

Tel.: +39/011 68 24 925 

Fax : +39/011 68 24 966

 Abstract: The study here analyzes, across European countries, the relationship between labour and drivers of technological innovation, also considering the interaction of these variables with the structural indicator of the public debt. The main findings are: the fruitful effect of total public expenditure on education as a percentage of GDP and R&D intensity on employment rate, whereas an increase of general government consolidated gross debt has a negative effect for employment rate as well as for technology proxies. Empirical evidence provides some elements to discuss main economic policy implications from relationships between observed facts.

Keywords: Employment Growth, Labour, R&D Intensity, Technological Innovation, Education, Public Debt. 

JEL Codes: J01; J08; I20; H63; O30; O33

I thank Vittorio Valli (University of Torino), John Walsh (School of Public Policy, Georgia Institute of Technology, Atlanta) and Levent Kutlu (School of Economics, Georgia Institute of Technology, Atlanta) for main suggestions to a preliminary draft of this paper. I also thank Ruth Uwaifo Oyelere (Georgia Institute of Technology and IZA Fellow, Bonn Germany), participants at the 2012 Spring Seminar Series - School of Economics (Georgia Institute of Technology) and 2012 Triple Helix International Conference Committee for fruitful comments and suggestions. Special thanks to Ceris-CNR and Georgia Institute of Technology staff for research support. In addition, I gratefully acknowledge financial support from the CNR - National Research Council of Italy for my visiting at Yale University and Georgia Institute of Technology where this research has been originated and developed. Diego Margon and Silvana Zelli provided excellent research assistance. The usual disclaimer holds, however.

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