TWO DECADES OF CATCHING UP

While the Irish Government has made a clear commitment to supporting the research and development (R&D) sector and to building the smart economy in the past decade, now is an appropriate time to know where it currently stands in comparison to its counterparts. In particular, we want to compare Ireland’s R&D levels (GERD, BERD, HERD, and GOVERD) in relative to the levels of UK, EU-15, and OECD respectively.

Our analysis mainly draws upon the OECD’s Main Science and Technology Indicators database, as well as the Forfás’ publications related to R&D data in Ireland since 2001. These publications include, among many others, Research and Development in Ireland 2001 – At a Glance, Statistics at a Glance 2011, State Investment in Research and Development 2011-2012.

According to a study by the Centre for Business Research (CBR) in 2011,

‘Ireland’s economy is unusual in structure. The majority of its manufacturing industry is foreign owned with very high recorded profits, of which large amounts are repatriated each year resulting in a wide divergence between GDP and GNP. For this reason, when we refer to output in Ireland, we are referring to GNP.’

Therefore, our analysis considers GNP in the case of Ireland when calculating the shares of R&D expenditures; in the cases of all the other countries, it also uses GDP. The time frame chosen for the comparisons spans two decades since 1993, which enables us to understand how Ireland’s R&D levels have evolved in a longer period.

Furthermore, in order to focus on the relative performance of Ireland to the others, in each comparison, we have set all the R&D levels (GERD, BERD, HERD, and GOVERD) of that country (such as the UK in Figure 1) at the value of 100. The values shown by Ireland were the ratios between the R&D levels of the two countries. For example, Ireland’s GERD in 1993 was valued at 66 while the UK’s GERD in 1993 was valued at 100, meaning Ireland’s GERD as a percentage of GNP was at a much lower level than UK’s GERD as a percentage of GDP in that year.

The R&D intensity data has its limitations; for example, even if the real R&D expenditure remains the same, a fall in GDP (or GNP) could lead to an increase in the intensity. In the case of Ireland, Forfás has clearly pointed out in its Business Expenditure on Research and Development (BERD) 2011/2012 that,

‘The increase in BERD intensity from 2009 to 2011 is entirely due to a fall in GNP as BERD remained unchanged during that period.’

Considering the significant impacts of the 2008 Economic Crisis on the outputs of so many countries, Ireland may not be alone in this regard. One should bear in mind how the real expenditures of R&D in a country have changed, in addition to the development of its R&D intensity.

Figure 1 below shows how Ireland compared with the UK in investing in R&D activities between 1993 and 2012.

In general, Ireland started at a much lower level than the UK, has been catching up ever since, and showed better performance in the most recent years. The value for Ireland’s GERD in 2008 was 97 – still lower than the UK level – but it increased to 114 in 2009, leading the UK for the first time. In 2012, that value stood at 123, while the values for Ireland’s HERD and BERD were 120 and 135 respectively. During the past two decades, however, Ireland’s GOVERD has always been at a lower level than that that of the UK, although it has also narrowed the gap between the two.

Figure 1 Ireland’s R&D levels in comparison to the UK, 1993-2012, UK=100

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Sources: OECD (2014), Main Science and Technology Indicators.

In figure 2 we present the comparison between Ireland and EU-15. EU-15 area countries are: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom. Ireland’s R&D levels have also been catching up with EU-15 ones in all aspects but GOVERD intensity. Its GERD level was the same to that of EU-15 in 2012, while its BERD and HERD levels were higher than EU-15 in that year.

In the first decade – 1993-2003 – Ireland’s BERD showed a relatively smaller gap between EU-15 than its HERD did. Since 2004, Ireland’s HERD intensity increased sharply to catch up with the HERD level of EU-15 in a few years. In 2009 – one year after its HERD intensity became higher than that of EU-15 – BERD intensity in Ireland was also above the EU-15 average.

The Ireland-EU-15 comparison obviously shows a two-stage process, in the first of which BERD was relatively stronger than HERD while in the second HERD became relatively stronger than BERD. A plausible explanation for this could be related to the great effort given by the Irish Government in the early 2000s in developing world class research and expanding its investment in universities and other third level institutions.

Figure 2 Ireland’s R&D levels in comparison to EU-15, 1993-2012 (EU-15=100)

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Sources: OECD (2014), Main Science and Technology Indicators. 

Figure 3 below compares Ireland’s R&D levels with those of OECD countries. An obvious finding is that, Ireland’s HERD intensity has always shown better relative performance than its BERD and GERD, as its HERD line has always been above its BERD and GERD lines. This is an interesting point, as it implies that in comparison to the OECD average, Ireland’s relative R&D strength has consistently been lying in its higher education sector. That figure 2 and figure 3 showing different patterns suggests it matters which country/countries we choose to compare Ireland with.

Ireland’s HERD intensity became higher than the OECD average in 2004 for the first time, and increased even further in the recent years, standing at the value of 125 in 2012 (OECD=100). BERD and GERD of Ireland have changed in a similar pattern – the two lines to a large extent overlap. In these two indicators, Ireland did not essentially catch up with its OECD counterparts until 2009, before when the values of its BERD and GERD fluctuated between 60 and 75, much lower than the OECD average. Similar to what figures 1 and 2 have shown, Ireland’s GOVERD has become further behind the OECD countries. It demonstrates a continuous deterioration of its government expenditure on R&D in relative to many other countries. 

Figure 3 Ireland’s R&D levels in comparison to OECD, 1993-2012 (OECD=100)

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Sources: OECD (2014), Main Science and Technology Indicators.

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One thought on “TWO DECADES OF CATCHING UP

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