A study on the optimal ratio of research and development investment in the energy sector

An empirical analysis in South Korea

Juyong Lee, Youngsang Cho, Jungwoo Shin

Research output: Contribution to journalArticle

Abstract

The necessity for energy research and development (ER&D) is increasing as greenhouse gases and climate change are becoming global issues. To support sustainable economic growth through ER&D, it is necessary to examine the optimal ratio of ER&D investment to total R&D investment to maximize economic growth. However, there are no studies on the appropriate level of ER&D in total R&D investment for economic growth. This study attempts to empirically estimate the optimal ratio of ER&D investment to maximize gross domestic product (GDP) in South Korea. We utilized the Cobb-Douglas production function for our econometric model and corrected the autocorrelation problem using the Cochrane-Orcutt iterative procedure. Our results showed that both, ER&D and non-ER&D have positive correlations with GDP. The optimal ratio of ER&D is derived as 13.23%, which indicates that the current ratio of Korean ER&D should be revised upward. Further, ER&D investment in the private sector needs to be increased to achieve the optimal ratio because the current statistics in Korea describes that private companies in the energy industry invest much less in R&D than the government. Based on the results, we suggest government strategies to enhance ER&D investment in the private sector as well as the public sector.

Original languageEnglish
Article number288
JournalEnergies
Volume12
Issue number2
DOIs
Publication statusPublished - 2019 Jan 17

Fingerprint

Empirical Analysis
Research and Development
Sector
Economic Growth
Energy
Gross
Economics
Maximise
Public Sector
Production Function
Greenhouse Gases
Climate Change
Iterative Procedure
Econometrics
Autocorrelation
Greenhouse gases
Climate change
Industry
Statistics
Necessary

All Science Journal Classification (ASJC) codes

  • Renewable Energy, Sustainability and the Environment
  • Energy Engineering and Power Technology
  • Energy (miscellaneous)
  • Control and Optimization
  • Electrical and Electronic Engineering

Cite this

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A study on the optimal ratio of research and development investment in the energy sector : An empirical analysis in South Korea. / Lee, Juyong; Cho, Youngsang; Shin, Jungwoo.

In: Energies, Vol. 12, No. 2, 288, 17.01.2019.

Research output: Contribution to journalArticle

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