Public R&D investment in economic crises

We study the cyclicality of public R&D in 29 OECD countries over the period 1995 to 2019. Public R&D is procyclical on average, and mostly driven by adjustments in public R&D aimed at the government and higher education sectors. However, public R&D reacts asymmetrically over different phases of the business cycle, becoming acyclical during recessions. This acyclicality masks an important heterogeneity across countries: the world's leading innovators behave countercyclically during recessions and even increase public R&D. These results suggest that countries behind the innovation frontier could still strengthen their resilience to economic crises by adopting countercyclical public R&D strategies, thereby also safeguarding long-term growth through innovation.