Public investment in research and innovation (R&I) contributes to long-term GDP growth, yet in Denmark R&I investments are effectively treated as an expense in macroeconomic models. A first step could be for a new government, ahead of next year’s negotiations on the research reserve, to commission estimates of the impact of R&I investments on Danish productivity and GDP growth.
DFIRbrief 60: Research and Innovation is an Investment, Not an Expense (pdf)
International estimates from the United Kingdom, the United States and the EU point to substantial returns on public R&I investments of between 8:1 and 12:1. In Denmark, the Ministry of Higher Education and Science launched a comprehensive evaluation of public R&I investments in 2017. However, a systematic follow-up on the dynamic effects of public R&I investments in Danish macroeconomic models is still lacking. As a result, R&I is effectively treated as an expense in the models, which may influence political priorities.
As a first step, the government should, ahead of the next negotiations on the research reserve, prepare a background note estimating the impact of R&I investments on Danish productivity and GDP growth. This would provide a more accurate picture of R&I as an investment in future prosperity and welfare.
This could form the basis for a public debate on Denmark’s R&I investments, including, for example, the rationale behind the offsetting of Danish researchers’ uptake of Horizon Europe funding. By combining data-driven policy design with clear strategic objectives, Denmark can ensure that funding more effectively supports competitiveness, strategic autonomy and security.
It is inherently difficult to calculate the social returns to public R&I investments, and such estimates are subject to uncertainty. Benefits may take years to materialise. Pathways to value creation can be complex and depend on system capacity and complementary investments. New ideas may render existing technologies obsolete and erode returns on earlier investments. Finally, while part of Denmark’s economic growth is based on foreign R&I, Danish R&I is often a prerequisite for absorbing it.
Precisely because these estimates are complex, there is a strong case for addressing them systematically. Denmark can draw inspiration from models developed abroad.
