SICENTERLjubljana, Slovenia

Time for a fresh startBut time is not on our side

Urgent need for more R&D resources for Lisbon strategy

Ljubljana, June 13, 2005

Professor Pavle Sicherl

SICENTER and University of LjubljanaEmail: Pavle.Sicherl@sicenter.si; www.sicenter.si

Copyright © 1995-2005 P. Sicherl All rights reserved

141

111 113 114

183

100

110

120

130

140

150

160

170

180

190

Income (GDP percapita)

Employment Rate Annual HoursWorked

Productivity (GDPper hour)

R&D Investment(R&D per capita)

Ind

ex E

U=

100

(200

3)

(2002)

Differences with the USA are much larger for R&D per capita (index USA/EU15=183) than for GDP per capita (index 141).

0

5

10

15

20

25

30

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Time

EU

tim

e la

g i

n y

ears

Employment Rate R&D Investment (R&D per capita) Income (GDP per capita)

Productivity (GDP per employed) Productivity (GDP per hour)

US=0

The time lag behind the USA over time has been the highest for employment rate and R&D per capita (25 and 23 years)

Source: P. Sicherl, A Comparison of European and US Economies Based on Time Distances, EUROCHAMBRES, Brussels, March 2005.

EU catch-up - year in which EU15 catches up with the US under various assumptions

2000

2010

2020

2030

2040

2050

2060

2070

2080

2090

2100

2110

2120

2130

0.5% 1% 1.5% 2% 2.5% 3% 3.5% 4% 4.5% 5%

Assumed positive difference of EU15 growth rate over that of the US

Ye

ar

of

ca

tch

up

R&D Investment (R&D per capita)

Income (GDP per capita)

Productivity (GDP per employed)

Productivity (GDP per hour)

Employment Rate

Small improvements are no match for the large gap. If growth rate for R&D per capita for EU15 would be only 0.5% higher

than that of the USA, the catch up would take place only in 2123, for 1% higher growth rate only in 2063. We need a big push.

Source: P. Sicherl, A Comparison of European and US Economies Based on Time Distances, EUROCHAMBRES, Brussels, March 2005.

The competitive position is much better measured by R&D per capita or R&D per employed than by the share of R&D in GDP.

• The target of 3% share of R&D in GDP is a good mobilisation instrument in the medium term. However, even if implemented it would not mean catching up or even surpassing the USA in R&D per capita at such time

• Assumption that EU15 would reach 3% of R&D/GDP already in 2003: Index USA/EU15 2003: GERD/GDP 0.92 x GDP per capita 1.40 = GERD per capita 1.29

• Even if the target of 3% share would be implemented already in 2003, because of much lower GDP per capita the R&D per capita would be in this hypothetical situation in the USA still higher than in the EU15 by 29 percent (or by 27 percent for R&D per employed).

• Europe has to do much better for Lisbon strategy.