R&D Races and Spillovers between the EU and the US: Some Causal Evidence

This paper examines the causal relationships between the R&D sector activities of the EU and the US in a multivariate framework. As a novelty in this literature, we employ the subset transfer function methodology to account for the possibility of “dry holes” in the effects of R&D efforts on economic activity. The authors find that R&D activity in the EU is a direct Granger-cause of both R&D and economy-wide productivity in the US, and the effects are negative.