Linking R&D Expenditure to Labour Market and Economic Performance: Empirical Evidence from the European Union

Abstract

This article examines how research-and-development (R&D) expenditure—as a share of GDP—both in total and disaggregated by sector (business enterprise and government)—shapes key socioeconomic outcomes in the EU-27. Drawing on Eurostat panel data for 2013–2022, we estimate fixed- and random-effects models with sector-specific lags. Business R&D expenditure is associated with lower female and male unemployment and faster GDP growth. Government R&D expenditure, by contrast, widens the gender pay gap and dampens GDP per capita after two years, although it attracts foreign direct investment in the short and medium term. The diminishing impact of R&D over time underscores the need for policies that sustain innovation benefits.