The Short and Long-Run Effects of R&D Subsidies on Economic Growth in

Research and development (R&D) is usually considered from cost point of view while in the framework of knowledge based economy, R&D is regarded as a part of public investment in an economy. In this paper, the short and long-run effects of R&D subsidies on economic growth are examined in Iran using the data over the period 1975- 2007. The ARDL approach is used to estimate empirical models. The Iranian Government is almost the sole investor of R&D. The results of estimated model confirm that R&D has positive and significant effect on economic growth in the short-run in Iran while in the long-run R&D has positive effects on growth but its coefficient is statistically insignificant. Moreover, the results show that physical capital has positive and significant effect on GDP growth both in the short and in the long-run. However, labor force has negative and insignificant effect on GDP growth both in the short and in the long-run.