DOI: 10.53443/anadoluibfd.1918777 ISSN: 2687-184X

INNOVATION AT A FISCAL COST? ACCOUNTING EVIDENCE ON R&D EXPENDITURES, PUBLIC FINANCIAL STRUCTURE AND FISCAL DISCIPLINE IN OECD COUNTRIES

Özge Özkan
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This study examines the effects of R&D expenditures on public financial structure and fiscal discipline in OECD countries. Although the contribution of R&D to economic growth has been widely discussed in the literature, its impact on budget balance has been addressed in a limited number of studies. In this context, annual data for 37 OECD countries covering the period 2013–2023 are utilized. Net lending (+) / net borrowing (-) (as a percentage of GDP) was used as the dependent variable; inflation rate and GDP growth rate were used as control variables; and the independent variables were R&D expenditure as a percentage of GDP, government debt as a percentage of GDP, government expenditure as a percentage of GDP, and total expenditure as a percentage of GDP. A dynamic panel data approach (GMM) is employed, and the results are tested using the Driscoll–Kraay robust estimator. The findings indicate that R&D expenditures have a negative short-term effect on budget balance, and increases in government spending and public expenditures deteriorate fiscal balance. In contrast, economic growth is found to support budget balance. The results suggest that the predominant classification of R&D expenditures as current expenses in public accounting may create pressure on fiscal discipline. By analyzing the relationship between R&D and fiscal discipline from a public accounting perspective, this study provides a comprehensive contribution to the literature.

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