Wynn, Katherine, Mingji Liu, and Jasmine Cohen. “Quantifying the Economy‐wide Returns to Innovation for Australia.” Australian economic papers 61.3 (2022): 591–614. Web.

1. R&D Expenditure in Australia: Australia’s R&D expenditure as a share of GDP is lower than the OECD average and has been declining over the past decade. This is significant given that a quarter of Australia’s economic output and 10% of employment are tied to scientific endeavors.
2. Endogenous Growth Theory: This theory, which is central to the paper, suggests that long-term economic growth in advanced economies is driven by productivity growth stemming from technological change, which itself results from intentional innovation investments.
3. Empirical Estimates of R&D’s Impact: Various methods have been used to estimate the relationship between R&D and productivity/economic growth. These include case studies, firm/industry-specific regression analysis, national-level regression methods, and macroeconomic growth models.
4. Economic Returns to R&D in Australia: The article finds that each dollar of R&D investment in Australia generates approximately $20.8 in economy-wide benefits. However, when adjusted for factors like capital deepening and delays, the more conservative estimate is about $3.5 per dollar of investment, or a 10% annual return. These returns are higher than those in the United States, potentially due to Australia’s position behind the global innovation frontier.
5. Adjusting for Mineral Resources in R&D Data: When mineral resource data is removed from Gross Expenditure on R&D (GERD), the decline in GERD appears less severe, indicating that much of the decline is due to the wind down of the mining boom.
6. Implications of the Findings: Even the most conservative results show substantial returns, comparable to private equity market performance in Australia. The baseline unadjusted results are consistent with previous Australian innovation studies.
7. Australia’s Position on the Innovation Frontier: Empirical evidence suggests that Australia is behind the global innovation frontier, which may explain the higher returns as it “catches up”.
8. Conclusion and Future Research Directions: The article concludes that the economy-wide returns to innovation in Australia are significant, even after adjustments. Future research could explore marginal returns to R&D and the effects of international spillovers and absorptive capacity on Australian productivity and growth.