The shock of armed conflict on research and development investment: empirical evidence from cross-country data

Abstract

ABSTRACT Research and Development(R&D) investments could be significantly impacted by increased social instability and economic uncertainty as a result of frequent armed conflicts. Therefore, based on cross-country panel data from 1989 to 2021, this paper develops system GMM, panel threshold and quantile models to explore the shocks on R&D investment from the different consequences of armed conflict. Results show that armed conflict's occurrence, deaths and displacements discourage investment in R&D capital and R&D personnel. Armed conflict's occurrence generates a stronger negative shock on R&D investment in Europe and the Americas than in Asia and Africa. Considering the size of the country, the negative impact of armed conflict is more pronounced for small countries and less pronounced for large countries. There are nonlinear links between armed conflicts and R&D investments when GDP is at different threshold intervals. Further, the intensity of armed conflict determines the extent to which R&D investment shrinks. Our research is critical to the effective resolution of armed conflicts to achieve peaceful development and sustainable economic growth.