Economic Growth and Gross Domestic Expenditure on R&D in G-7 and BRICS Countries: Long-run Comparative Synergy Analyses

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1 Economic Growth and Gross Domestic Expenditure on R&D in G-7 and BRICS Countries: Long-run Comparative Synergy Analyses Jari Kaivo-oja, Jyrki Luukkanen & Teemu Haukioja 2 Finland Futures Research Centre, Turku School of Economics, University of Turku & 2 Pori Unit, Turku School of Economics, University of Turku Session V, China and Countries Outside Europe, Tuesday 3 June 27 Background of the study The study is based on statistical synergy methodology Data from the Wordbank G7 countries: USA, Canada Germany, France, UK, Japan and Italy BRICS countries: Brazil, Russian Federation, India, China and South Africa Focus is on the synergy of GDP-GERD interaction in G7 and BRICSeconomies

2 Methodological background: Synergy analysis Maximum synergy can be obtained when relative changes Δx and Δy are equal. In case the change in y i.e. Δy is larger than changes in x i.e. Δx, the quotient must be inverted to estimate potential synergy ratio. Therefore, potential synergy/trade-off between two variables can be measured between - to +. Negative sign indicates trade-off between two variables. In this study we calculate conventional index number of synergy and long-run synergy index. Synergy analysis background Conventional synergy: Economic cycles are not smoothened Long-run stabilized synergy: Calculation based on Moving Average of variables to compensate the impacts of economic cycles and smoothen the results in order to reveal the trends 2

3 Some benefits of synergy methodology It allows us to present explorative analysis of the relationships between key variables (in this case GDP and GERD) It allow critical analysis on long-run dynamics of economies The synergy methodology provides essential information for economic and social policy-makers It is new tool for sustainablity analysis The evaluation of synergy/trade-off proposed on this paper indicates only possible (potential) causality but, does not infer a causal relationship between the variables Typically decision-makers expect that there is positive synergy between GERD and GDP, but finally it is empirical question to evaluate Focus on two powerful economic groups: G7 and BRICS -group 3

4 GERD, % of GDP in the G7-countries and in BRICS-countries, years , Source: World Bank 27 4 GERD, % of GDP in the G7-countries and in BRICS-countries, ,5 3 2,5 2,5, Canada France Germany Italy Japan United Kingdom United States of America Russian Federation China Brazil India South Africa GDP (current prices PPP) in the G7-countries, , source: World Bank,2E+3 GDP (current prices PPP) in the G7-countries, E+3 8E+2 6E+2 4E+2 2E GDP, current prices, PPP Russian Federation China Brazil India South Africa 4

5 GDP (current prices PPP) in the G7-countries, , Source: World Bank GDP (current prices PPP) in the G7-countries, E+3,8E+3,6E+3,4E+3,2E+3 E+3 8E+2 6E+2 4E+2 2E Canada France Germany Italy Japan United Kingdom (Northern Ireland) United States of America GERD (current prices, PPP) in the G7-countries, , source: World Bank 27 6E+3 GERD (current prices, PPP) in the G7-countries, E+3 4E+3 3E+3 2E+3 E Canada France Germany Italy Japan United Kingdom (Northern Ireland) United States of America 5

6 GERD (current prices, PPP) in the BRICS-countries, , Source: World Bank 27 2,5E+3 GERD (current prices, PPP) in the BRICS-countries, E+3,5E+3 E+3 5E Russian Federation China Brazil India South Africa Average conventional synergy of G7-countries and BRICS -countries, years Average conventional synergy of G7-countries and BRICS -countries, years ,9,8,7,6,5,4,3,2, Average conventional synergy, G7-countries Average concentional synergy, BRICS -countries 6

7 LR Synergy Index Average long-run synergy of G7-countries and BRICS -countries, years 27-25,8 Average long-run synergy of G7-countries and BRICS -countries, years 27-25,7,6,5,4,3,2, Average long-run synergy, G7-countries Average long-run synergy, BRICS -countries Long-run synergy levels in the G7-countries, years ,5 Long-run synergy levels in the G7-countries, years , LR-Synergy-GERD-GDP-Canada LR-Synergy-GERD-GDP-France LR-Synergy-GERD-GDP-Germany LR-Synergy-GERD-GDP-Italy LR-Synergy-GERD-GDP-Japan LR-Synergy-GERD-GDP-UK LR-Synergy-GERD-GDP-USA -,5-7

8 LR Synergy Index Long-run synergy levels in the BRICS-countries, years ,5 Long-run synergy levels in the BRICS-countries, years , LR-Synergy-GERD-GDP-Russian Fedearion LR-Synergy-GERD-GDP-China LR-Synergy-GERD-GDP-Brazil LR-Synergy-GERD-GDP-India LR-Synergy-GERD-GDP-South Africa -,5 - Average GDP-GERD synergy levels in G7- and BRICS-countries, year ,8 Average GDP-GERD synergy levels in G7- and BRICS-countries, year ,7,6,5,4,3,2, Brazil Russian Federation France China Germany Italy India Japan Canada South Africa USA UK 8

9 Long-run synergy index Average long-run GDP-GERD -synergy levels in G7- and BRICS-countries, years Average long-run GDP-GERD -synergy levels in G7- and BRICS-countries, year ,9,8,7,6,5,4,3,2, Brazil UK France USA Russian Federation India Canada South Africa Germany Italy China Japan Long-run synergy levels in the USA, Russian Federation, China and India, years ,5 Long-run synergy levels in the USA, Russian Federation, China and India, years , LR-Synergy-GERD-GDP-USA LR-Synergy-GERD-GDP-Russian Fedearion LR-Synergy-GERD-GDP-China LR-Synergy-GERD-GDP-India -,5-9

10 Long-run synergy index European perspective: Long-run synergy levels in France, Germany and the United Kingdom, years ,5 Long-run synergy levels in France, Germany and the United Kingdom, years , LR-Synergy-GERD-GDP-France LR-Synergy-GERD-GDP-Germany LR-Synergy-GERD-GDP-Italy -,5 - Average convenional and long-run synergy trends of G7- and G7 countries in the years of financial crisis in the world economy, years Average convenional and long-run synergy trends of G7- and G7 countries in the years of financial crisis in the world economy, years 27-25,9,8,7,6,5,4,3,2, Average conventional synergy, G7-countries Average concentional synergy, BRICS -countries Average long-run synergy, G7-countries Average long-run synergy, BRICS -countries

11 Conclusions Synergy analysis provides interesting perspectice to global innovation ecosystems. For example we were able to report average GERD-GDP synergy levels, which inform global decision-makers about success in synergy levels but also failures in synergy levels Typically decision-makers expect that there is positive synergy between GERD and GDP, but finally it is empirical question to evaluate. Our study indicates that in some economies there are periods when there is also negative synergy. Synergy levels vary in time. Synergy dynamics is different in G7-countries compared to BRICS-countries: Key finding is that after 22 BRICS-countries have improved their average synergy level compared to G7-countries, and they have now more stable average synergy level compared to G7-countries average level Almost all countries have improved synergy levels between GDP and GERD in the long run which indicates harder compeition in the field of global innovation ecosystems. China has biggest problems among BRICS-countries with its synergy level, surprisingly Brazil is having very hight positive synergy level amonf BRICScountries Conclusions Japan has the biggest problems among G7-countries with its synergy level, UK, France and USA have highest long-run synergy levels among G7-countries Among global players, LR synergy levels of USA, India and Russia do not differ much after 22 (LR-SI is about +.75), but synergy level of China remains on lower level (LR-SI is about +.3) in the period of In 22 Russia had very negative synergy level (LR-SI was -.86), but Russian Federation improved its performance after this exceptional year. Development to negative direction in long-run synergy started in 999 although industrial production increased % in Russian Federation in years This special observation requires more attention in the field of global innovation ecosystem research Among European G7-group members, France had the best positive LR-synergy level performance in , Italy showed two negative LR synergy breaks in 998 (LR-SI -.86) and 22 (LR-SI -.3), but it has showed better peroformance after this year (Average LR-SI +.6 in 23-25)

12 Thank you for attention! Dr Jari Kaivo-oja, FFRC, TSE, University of Turku Dr Jyrki Luukkanen, FFRC, TSE, University of Turku Dr Teemu Haukioja, Pori Unit, TSE, University of Turku 2