The Relationship between Sustainable Economic Growth, R&D Expenditures and Employment: A Regional Perspective for the North-West Development Region of Romania

Abstract

The role of research and development (R&D) in economic growth has been intensively promoted by scholars and policy-makers of the last decades, emphasizing its impact on technological innovation, intensive and sustainable growth and economic revival. The R&D sector is considered a main driver in the fight against chronic underdevelopment, regional disparities, isolation and lack of socio-economic perspectives. Although the steady economic growth of Romania in the last 15 years continues to converge with the European Union’s average, the regional disparities persisted and even deepened, the country still being considered a modest innovator, and resources allocated to research and innovation are far below the European level. In this paper, we aim to identify the existence, direction and duration of the relationship between economic growth, expenditure and employment in the R&D sector. We applied the Johansen cointegration test, the VECM model and Granger causality both at the county and component region levels during the 1995–2021 period. The results of our research reveal the consistency of these bidirectional relationships at the regional and sub-regional levels, especially in the long run. We also emphasize the importance of economic growth in supporting public and private efforts for R&D: the regions that can allocate more resources to research, development and innovation (RD&I) will benefit from the more reliable and long-run-oriented economic growth.